No trades today; I was at the monitor all morning but did not get an order flow transition I liked. Well I did but NT does not have Market if touched orders so I missed it.

That actually led me on my next mission...to find something more reliable then NT. After some chit chat with a mentor of mine he likes xtrader and uses velocity as his broker for one of his accounts. So I will begin to give them a look.

I spent A LOT of time the last few days going over gambling theory and risk management regarding poker and gambling in general. I am looking for ways to apply those statistical properties to trading. I am not the first nor will I be the last to do so but its fun and has definitely changed my current trading.

I am making the small modification to my trade plan:
From 930AM-1200 NOON it will be 2:1 And any other time will be 1:1. I am also limiting my daily loss to 2% which currently means two one contract trades or one two contract trade.

I am working on some new math models for risk management and creating a fixed amount of trades per day as a way to control what I can control in the markets. I ran some preliminary numbers and do not believe the results. So I will be looking them over with a fine tooth comb.

Tomorrow is another day and begins the second quarter.

Trade on and Risk little!

Grant

So today was the new plan; and its off to a fun start. I will be trading this sim for April and see how I do when I adhere to strict risk management and limiting trades per day.

Since trade one occurred between 930-1130 it was the 2:1 model.

Now since all this in the long run is just a binomial coin flip, win or lose, my entries are not any reflection of some wise signal to buy or some skill. I will walk you through this morning trade. Also note, I do not feel that something that happened thirty minutes ago holds any relevance per se to what the market may do now. So I am only comparing one price rotation to the previous price rotation that correlates (down rotation with previous down etc.) My charts are a reversal chart (pf chart) thats it. Nothing more.

So the attached pic is the chart layout; upper row is filtered trades and then retail trades, the bottom row is filtered volume and retail volume.

On the column that begins the red reference line was the most recent down price rotation so I will make it as a buy region if I see all four charts showing same tick level as a buy in the down rotation and its within four ticks of bottom. Now when next down rotation occurs, every other bar, I will be watching to see how the tape feels about this level.

So the 31.25 level was marked for potential buy.

Price rotated up and then back down to my level, Now what did I see and NOT SEE is whats important.

I like to see an increase in big filtered buying, like they are defending a level, AND NOT SEE big selling. On the retail side I like to see trapped traders, those who went short a shitload and will soon realize they were wrong.

So you will see in the price rotation retail side we had 10K 4k SELLING THE NEW LOWS, and the previous down rotation was a fraction of that volume in the lows. On the filtered side, One does not see massive selling. I was watching 30.75 level for it was converting sellers to buyers and I saw filtered volume at 105 then spike to over 700 and all charts were giving me an order flow conversion so I took a shot to the long.

Now at 32.50 we had a sell signal, so I did get my 8T on the trade one and since it was after 1130 I had to change to 1:1 model.

Took a shot to the short side and moved stop to -2 when price went +2; got stopped out.

Net for the day +6T. But it will be the monthly stats that matter.

I was off the last week from trading and doing some work in the hospital.

But when I was home I continued to do some more of my statistical work on past market behavior and guys I gotta tell ya....it does not matter what "system" one trades with or employs for signals; it still comes down to trade management and risk management.

I also think that many people on this site have EXPECTATIONS way out-of-line with reality. Why is it that the best of the best aim for 20% annually and some on this site think we can make 20% a month? I thought long and hard about some of the snake oil sales on line and people need to put their greed aside and think for a second....

Do you really think that someone can produce results like they "post" and their "secrets" or "special indicators" would not be utilized by the pros until the edge that existed would be null.

I know this is a tangent but I hate to see so many people starting with 5K, 10K, 25K and think they will magically pull out 5K-10K a month; or annual returns from 1200-2000%. Think about it guys.

Anyway, my work is showing that the market will give you what its going to give ya. End of story. Your better off just setting a fixed stop and target; ensuring target is 2-3x your risk and in the long run you will win IF and ONLY IF, you have a fixed number of trades a day.

Biggest pitfall for many of us in the beginning is saying Ill quit after say three losses a day...but then even with a 3:1 model then if for Mon-Wed you loss each day thats 9X trades in the hole and you need three straight winning days to get to BE. But if one would take their head out of their asses and stop dreaming of pie in the sky get rich quick and traded only once a day, win or lose and stop for the day then they would be able to employ the positive edge of risk management.

Sorry for the mild rant but I am getting sick of seeing shit about this and that indicator and buying and selling...and so help me God if I see one more person write about "more buyers then sellers..." Im gonna lose it. Guys, every buyer is matched with a seller. End of story. But buying excessively on the offer or selling excessively on the bid will move the market and yes every buyer is still matched with a seller.

More to come....

@gparkis

I am interested in your approach, and I'd like to ask you to continue your postings. I really like your focus on risk/reward profiles and risk management.

A few questions/comments:

1. How do you "trade price, not setups"? Do you still use market profile?

gparkis 

I trade price, not setups

2. Can you explain more about the importance of limiting the number of events (trades) per day.

gparkis 

All I can say is anyone trading a risk reward less then 1:1 is gonna be a loser in the long run. There is no way to "get the market". In the end its all a dice roll, and trading an advantaged risk reward is not enough. One needs to also limit the number of events (trades) per day. I keep it to one trade per day per model. This is the only way to really define ones risk.

gparkis 

Anyway, my work is showing that the market will give you what its going to give ya. End of story. Your better off just setting a fixed stop and target; ensuring target is 2-3x your risk and in the long run you will win IF and ONLY IF, you have a fixed number of trades a day.

3. I would be interested in the results from your math models referenced in Post #21.

gparkis 

I am working on some new math models for risk management and creating a fixed amount of trades per day as a way to control what I can control in the markets. I ran some preliminary numbers and do not believe the results. So I will be looking them over with a fine tooth comb.

4. How did your experiment from April turn out and how have you been doing since then?

gparkis 

So I am going to run a little experiment for the month of April. I am going to hopefully prove that without a single indicator and just reading the tape, one can be consistent with proper risk and money management.

5. How did this challenge turn out? Did anyone accept it?

gparkis 

Challenge: lets us both create a live account with 5grand and use broker statements to see whom is managing/trading their account more successfully. We can start now and end it 12/31/11. This will prove that by not focusing on the real man behind the curtain; one is doomed for failure. P.S. My nameless mentor made money buy throwing a nerf dart at the monitor and based on where it landed he bought/sold the open using an advantaged risk/reward model. And it made money consistently.... point is....there is not intelligent way to analyze the markets that will tell ya anything. Its gambling, so one can only prevail using gambling techniques.....hmmmmm advantaged risk reward. Note...that style impresses the one trade a day montra! Know what your risk is always and that does not mean how much dam money one is risking on a trade or daily max losses.

6. If you are still considering doing a webinar, I would be interested.

gparkis 

Maybe I will do a webinar down the road........

Please continue this thread!
Thanks.

i will be happy to answer these questions once I am home tonight or tomorrow morning.

currently working like hell to get some basic stuff programmed that seems to be a headache for a lot of prgrammers.

gp

Coastline 

@gparkis I am interested in your approach, and I'd like to ask you to continue your postings. I really like your focus on risk/reward profiles and risk management. A few questions/comments: 1. How do you "trade price, not setups"? Do you still use market profile? I no longer use market profile or any indicator for that matter. I do not trade setups, meaning pullbacks or angle this or trendline that or any kind of system per se. I...and many a floor trader...have a price where we feel buyers and sellers may fight about value. But rememeber its just an area that gives us a place to focus on putting on a position. I trade a risk model and that is it. Price is simply the aspect that determines if risk model is on or off. 2. Can you explain more about the importance of limiting the number of events (trades) per day. For day traders, and even some position traders they trade too much. that is it. And it screws up the risk profile. I knew a trade who was shooting for 2:1 and if first trade was a loss then he would shoot again and if first trade was a win then he stopped. But that means when he won he would be 2x, 0 or -2x for the day. Meaning win 2, loss one win one, or loss both....noticing anything about that...he thought it was 2:1 but it really is 1:1 huge difference. Limiting your events or trades per day is big if trading a lot to really be able to define your risk. One can also decide to loss a certain percent per day and trade a number of times as long as they have not lost that percent cap. Just another way to control the only aspect of trading one can really control. 3. I would be interested in the results from your math models referenced in Post #21. Even with data mining...no consistent pattern exists enough to risk the bank so its not worth it. If an edge like that existed it would be leveraged until the market no longer existed. 4. How did your experiment from April turn out and how have you been doing since then? Random entry with proper money management can do well and it was okay. Nothing I would trade for real. That is not how I trade now or ever. I closed 2011 up 43% but I trade models that are 10:1 to 60:1 because I know I can not time the market or dictate the future but I can control my risk and position size. 5. How did this challenge turn out? Did anyone accept it? no 6. If you are still considering doing a webinar, I would be interested. It would be fun. But my stuff is about risk and position sizing...many people find it boring...I guess the same people whom are losing in the market. Please continue this thread! Thanks.

I am currently automating a lot of what I do and that is where my time is spent. I will be happy to post pics and chat with traders but I am not divulging how I trade directly.