Close to a 30point trend day down, and you can't hold onto your winners for more than 3 minutes? That's some serious A.D.D. On a day like this you should be trading with the trend, and pressing like crazy.
Yup... Uh... what were we talking about? That's why there are trend riders and there are scalpers. You have to know your personality, and choose a trading style that fits it. I probably ended up the day with just as many points as a trend rider, most likely more. If I shorted at the beginning of the day, and tried to hang on to the close, I probably would have a coronary just around 10:30 am
According to my charts, the spy traveled about 290 ticks today from absolute high to the absolute low. I only traded from 8am to 1pm est. But, if I took every entry signaled by my system for the entire session, and my mechanical system has a fixed 5 tick stop and fixed 10 tick target for the SPY, scalping with and against the trend. Counting all winners and losers, I would have ended up the day with +340 ticks on an instrument that moved 290 ticks tip to tip. How would that compare with most trend systems trading the SPY, or its futures counterpart, the ES. I don't know, I am earnestly asking the question, it would be interesting if someone did that exercise. Even if someone responded and said they made 2500 ticks, I still would not become a trend trader, because it's just not me. We can all make money, even given all our differences, using the method that suits us best.
Last edited by monpere; March 1st, 2011 at 05:06 PM.
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I would imagine that FT would be better qualified to expound on the subject of position sizing and expectancy, so I will defer to him. I do know however, that I would would rather have a small amount of very large winning trades than a large amount of very small winning trades, and I have a forty year data base from which to draw that conclusion.
I was a very risk adverse mechanical scalper on the floor for 25 years, cranking out a relatively a low 6 figure income every year. I used to be proud of the fact that I rarely had had a losing day, almost never had a losing week, and never had a losing month. Which is wonderful and all, but is exactly the kind of thinking that was inhibiting me from making a lot of money.
I was more concerned with the frequency of my winning trades than the size of my winning trades, because that is what is intuitive to most people, traders included. It wasn't until I left the floor and started trading electronically that I changed my risk reward parameters and style,(out of necessity) and began to press and add to my winners. What happened was the frequency of my winners went down, but the size of my winners grew by a lot, and so did my year ends.
Part of being a good trader is recognizing what kind of day it is. Range days and trend are traded differently, and days like today are special days which must be taken advantage of. The same goes for individual trades;some are better than others, and a good trader realizes when he is in a really good trade, and adds to, and presses that trade.
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I see the retracements, but how did you trade this day, if you traded this chart, or how would you trade it? Where would your entries be, where would your exits be? Can you put some entry/exit arrows or any notes on the chart so we can see the process.
Very strange day, the two different indicators, that is the MACD type oscillator below and the Supertrend, gave exactly the same entry signals. Remarkable, as one of them is a momentum and the other one a volatility based indicator. That said, if downward volatility resumes, it naturally creates downward momentum.
Also note that all three trend filters are clearly bearish, or can you see anything, which remained green on the chart?
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The last 3 red arrows on your chart are valid entries but really it's not the best place to enter as you are entering when price makes a similar bottom in all three cases which i usually consider a bad place to consider an entry. This is where amateurs open new positions. You are not an amateur, are you ? (p.s. this is humor)