Simple Directional Trading profitable? - futures io
futures io



Simple Directional Trading profitable?


Discussion in Traders Hideout

Updated
      Top Posters
    1. looks_one Big Mike with 7 posts (4 thanks)
    2. looks_two GaryD with 5 posts (26 thanks)
    3. looks_3 Massive l with 3 posts (6 thanks)
    4. looks_4 arnie with 3 posts (1 thanks)
      Best Posters
    1. looks_one GaryD with 5.2 thanks per post
    2. looks_two websouth with 3.5 thanks per post
    3. looks_3 Massive l with 2 thanks per post
    4. looks_4 Big Mike with 0.6 thanks per post
    1. trending_up 13,535 views
    2. thumb_up 47 thanks given
    3. group 12 followers
    1. forum 29 posts
    2. attach_file 0 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 125,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

Simple Directional Trading profitable?

(login for full post details)
  #1 (permalink)
 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
Experience: Advanced
Platform: Custom solution
Trading: Futures & Crypto
 
Big Mike's Avatar
 
Posts: 49,961 since Jun 2009
Thanks: 32,433 given, 98,157 received

Here is the topic:

Is it possible to be long-term profitable by trading only simple directional trades? For example, trading 'long ES' or 'short oil' etc. Just a simple directional trade, which either you or your trading strategy trigger. But this trade is entered by itself, meaning you don't require any other trade in any other position to go a certain way in order for this trade by itself to be profitable (and then repeat that as a long-term strategy).

Or, does long-term profitability require more complex trading? For instance, maybe:

- Spreads
- Options
- Hedges
- Portfolio trading

Mike

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/

Visit other sites? Please spread the word about your experience with our community!
Follow me on Twitter Visit my futures io Trade Journal Started this thread Reply With Quote
The following 2 users say Thank You to Big Mike for this post:

Journal Challenge April 2021 results (now extended!):
Competing for $1800 in prizes from Jigsaw
looks_oneMaking a Living with the Microsby sstheo
(81 thanks from 10 posts)
looks_twoSalao's Journalby Salao
(23 thanks from 6 posts)
looks_3Deetee’s DAX Trading Journal (time based)by Deetee
(16 thanks from 8 posts)
looks_4Learning to Profit - A journey in algorithms and optionsby Syntax
(12 thanks from 7 posts)
looks_5Maybe a little bit different journalby Malykubo
(1 thanks from 1 posts)
 
Best Threads (Most Thanked)
in the last 7 days on futures io
The Crude Dude Oil Trading System
73 thanks
futures io site changelog and issues/problem reporting
71 thanks
Would You Sell Your System?
70 thanks
FIO Journal Challenge - April 2021 w/Jigsaw Trading
31 thanks
Big Mike in Ecuador
25 thanks
 
(login for full post details)
  #3 (permalink)
 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
Experience: Advanced
Platform: Custom solution
Trading: Futures & Crypto
 
Big Mike's Avatar
 
Posts: 49,961 since Jun 2009
Thanks: 32,433 given, 98,157 received


And here is a follow-up "extra credit" question:

What level of complexity is required in order to be a long-term profitable trader?

Mike

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/

Visit other sites? Please spread the word about your experience with our community!
Follow me on Twitter Visit my futures io Trade Journal Started this thread Reply With Quote
The following user says Thank You to Big Mike for this post:
 
(login for full post details)
  #4 (permalink)
 GaryD 
Orlando, Florida
 
Experience: None
Platform: shoes
Trading: happy
 
GaryD's Avatar
 
Posts: 6,462 since May 2011

Combined answer. I believe the straight directional approach is the only way to go. Focus on a specialty instead of taking the shotgun approach and devote your attention to understanding your niche. I don't believe it can be as easy as "this crosses that", but I believe it should be very simple.

The complexity of trading is not in the charts, it is in the mind. Trading itself is not overly complicated. An example of the simplicity;

1) Markets only go up or down (they can consolidate, but they leave that state in a direction). There are only two directions. Deciding how far, how much room to allow it to breath can get complex, but it still comes down to one of two choices.

2) Markets will only move in one direction for so long before they change direction. Traders study, and for the most part agree, where the change of direction should most likely occur. That should limit your choices for where to watch.

3) Volume moves the market and volume changes the direction. Limit your entry and exit selections to areas where volume provides confirmation. Don't try to be the first to make a move. Volume will show itself.

4) Allowing winners to be larger than losers beats a lot of things that could go wrong.

It may require a lot of study and practice and learning and patience, but not anything that seems "complex". Maybe chart analysis, but even that can be simplified to far less than quantum physics.

Maybe a silly analogy, but as humans, our ability to balance on two legs is complex (try programming a robot to do it as well as a human). We had to practice that skill as babies until it became second nature. But today, while there may be a lot of complexity occuring in the background for our bodies to maintain balance (and we could probably map all of that with tons of analysis and indicators and charts), if you stand up right now, does any of that really matter? The complexity of balance is just going on silently in the background.

The study of anything can be complex, but is complexity a required point of focus? I'd rather go skiing. Balance is mandatory for that, but never enters my mind. Gravity is also mandatory, and complex, but still not on my checklist. Skiing does not require me to be aware of the complexity. What does matter, in my mind; have I practiced enough to have the ability to ski this run safely? If not, the prudent thing would be to get back to the practice area.

Reply With Quote
 
(login for full post details)
  #5 (permalink)
 trendisyourfriend 
Market Wizard
Quebec
 
Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
Broker: AMP/CQG
Trading: ES, NQ, YM
 
trendisyourfriend's Avatar
 
Posts: 3,994 since Oct 2009
Thanks: 3,671 given, 5,159 received


GaryD View Post
... I believe the straight directional approach is the only way to go...

Can you define what is a "straight directional approach"?

Reply With Quote
 
(login for full post details)
  #6 (permalink)
 GaryD 
Orlando, Florida
 
Experience: None
Platform: shoes
Trading: happy
 
GaryD's Avatar
 
Posts: 6,462 since May 2011


trendisyourfriend View Post
Can you define what is a "straight directional approach"?


Loosely quoting Big Mike; the trade is entered by itself, meaning you don't require any other trade in any other position to go a certain way in order for this trade by itself to be profitable. More complex trading would be, Spreads, Options, Hedges, Portfolio trading.

Expanding on that; Entering and/or exitting a trade in a single and immediate vehicle based on nothing other than what that particular instrument is doing. No correlations, no offsetting long/short strategies, no basket trades, etc. One on one.

Reply With Quote
 
(login for full post details)
  #7 (permalink)
 websouth 
Perdido Beach, AL
 
Experience: Intermediate
Platform: graph paper
Trading: Guitar
 
websouth's Avatar
 
Posts: 1,150 since Jul 2009
Thanks: 1,094 given, 1,313 received

Is it possible to be long-term profitable with simple system.
I believe GaryD gave a perfect well reasoned answer to this.

=============

define long term. goal to trade forever or make enough to walk away in x years?

Now here's a side thought -
600 fund managers flip a coin. Heads they make profit for the year. Tails they lose it all and fold up shop. Let's not over analyze this and assume even distribution.
2nd year - 300 left
3rd year - 150 left
4th year - 75 left
5th year - 37 left
6th year - 18 left
7th year - 9 left
8th year - 4 left

Now the 4 money mangers left strut out and say "look I have made money 8 years in a row while others have failed. I know the markets - I am a market guru." Millions then flows into their funds. (from all the people who had money in the funds that blew up previously, right? They want to be with a winner)

9th year - 2 funds blow up
10th year - 1 blows up
11th year - last one blows up
repeat.

all on a coin flip. no skill. So luck vs skill I dunno

“Be who you are and say what you feel because those who mind don't matter and those who matter don't mind.” - Dr. Seuss
Follow me on Twitter Visit my futures io Trade Journal Reply With Quote
The following 4 users say Thank You to websouth for this post:
 
(login for full post details)
  #8 (permalink)
 GaryD 
Orlando, Florida
 
Experience: None
Platform: shoes
Trading: happy
 
GaryD's Avatar
 
Posts: 6,462 since May 2011


websouth View Post

600 fund managers flip a coin. Heads they make profit for the year. Tails they lose it all and fold up shop. Let's not over analyze this and assume even distribution.

11th year - last one blows up
repeat.

all on a coin flip. no skill. So luck vs skill I dunno


Fund managers typically diversify, aka complexity. lol

Reply With Quote
 
(login for full post details)
  #9 (permalink)
 websouth 
Perdido Beach, AL
 
Experience: Intermediate
Platform: graph paper
Trading: Guitar
 
websouth's Avatar
 
Posts: 1,150 since Jul 2009
Thanks: 1,094 given, 1,313 received

right GaryD... the complexity just obscures the coin toss.
tough question Mike.

Someone else posted this link on the forum but I'm going thru it now. Free class on game theory
Game Theory — Open Yale Courses

“Be who you are and say what you feel because those who mind don't matter and those who matter don't mind.” - Dr. Seuss
Follow me on Twitter Visit my futures io Trade Journal Reply With Quote
The following 3 users say Thank You to websouth for this post:
 
(login for full post details)
  #10 (permalink)
 GaryD 
Orlando, Florida
 
Experience: None
Platform: shoes
Trading: happy
 
GaryD's Avatar
 
Posts: 6,462 since May 2011



websouth View Post
right GaryD... the complexity just obscures the coin toss.
tough question Mike.

Someone else posted this link on the forum but I'm going thru it now. Free class on game theory
Game Theory — Open Yale Courses


On the topic of simplicity, maybe think of it as the difference between a coin toss and a lottery ticket. One of those I can determine the odds of without a calculator. The lottery ticket, that is nothing but luck. Sure for $1 you might win $1M, but the odds reset every single time.

Now, in trading, no one says I have to flip a two-sided coin. It could be a 6-sided cube with 4 heads and 2 tails, or any other number of sides of any geometric shape. As long as heads outnumber tails ( aka the trade has a definable edge), tails may still come up x times in a row, but there is a positive expectancy to the bet.

Also, in trading, nothing says if I bet $1 and lose, that I can't make $3, $5, $10 on that same $1 bet when I win. I could have an expectation of profit on that same cube by betting on tails at $5 to $1.

Also in the pursuit of simplicity, by focusing on one or two markets, over time, has the potential to allow the trader to somewhat "understand" what the market is saying at a particular moment. That can give an additional edge, although very tough if not impossible to prove mathematically through standard backtesting. And certain markets are easier to read than others depending a lot on their volume and volatilty, so developing a feel may be easier in some instruments than others. I can't do it, but some traders will swear by reading order flow, as one easy example.

However, adding the component of discretion ("do I take the $3 showing or let it ride for $5", for example), increases complexity. As a strictly discretionary trader, my complexity in trading, is me. So I prefer to keep my math simple. I have a lot more to be concerned about.

Reply With Quote
 
(login for full post details)
  #11 (permalink)
 Surly 
denver, colorado
 
Experience: Intermediate
Platform: NT
Trading: ZS
 
Surly's Avatar
 
Posts: 704 since Mar 2011
Thanks: 628 given, 1,256 received


websouth View Post
[COLOR="Blue"]

Now here's a side thought -
600 fund managers flip a coin. Heads they make profit for the year. Tails they lose it all and fold up shop. Let's not over analyze this and assume even distribution.

...

Now the 4 money mangers left strut out and say "look I have made money 8 years in a row while others have failed. I know the markets - I am a market guru." Millions then flows into their funds. (from all the people who had money in the funds that blew up previously, right? They want to be with a winner)

all on a coin flip. no skill. So luck vs skill I dunno

I would describe this as a logical fallacy. Imagine another scenario with similar observational parameters:

150 basketball players flip a coin. Heads they are in the upper half of scoring on in the NBA, tails they are in the lower half.
2nd year - 75 left
3rd year - 37 left
4th year - 18 left
5th year - 9 left
6th year - 4 left

Now Kobe Bryant, LeBron James, Carmelo Anthony, and Pau Gasol strut out and declare themselves some of the best players in the NBA. Is this skill or just luck?

The logical error is combining an observation (few NBA players are at the top of the game) with an arbitrary cause (their success is just luck) and creating a conclusion: Being good at basketball is simply luck. Just because luck is a possible explanation, does not make it the truth.

I think anybody who approaches trading seriously and has studied it for several years would describe it as a skill-based activity More of an art than a science.

Seek freedom and become captive of your desires. Seek discipline and find your liberty. - Frank Herbert
Visit my futures io Trade Journal Reply With Quote
The following 3 users say Thank You to Surly for this post:
 
(login for full post details)
  #12 (permalink)
 GaryD 
Orlando, Florida
 
Experience: None
Platform: shoes
Trading: happy
 
GaryD's Avatar
 
Posts: 6,462 since May 2011


Surly View Post
Just because luck is a possible explanation, does not make it the truth.

I think anybody who approaches trading seriously and has studied it for several years would describe it as a skill-based activity More of an art than a science.

Would bet on that trade for sure. Agree 100%.

Reply With Quote
 
(login for full post details)
  #13 (permalink)
 Silver Dragon 
Legendary Data Wizard!!!
Cincinnati Ohio
 
Experience: Intermediate
Platform: TastyWorks
Broker: TastyWorks
Trading: FX, Stocks, Options
 
Silver Dragon's Avatar
 
Posts: 2,005 since Feb 2011
Thanks: 5,755 given, 4,868 received


Surly View Post

I think anybody who approaches trading seriously and has studied it for several years would describe it as a skill-based activity More of an art than a science.

Trading is the art of a observation of an action; A trader anticipates the a reaction of the observed action and makes a decision to place a trade or not.

This could never be a science because each action observed depends on your own point of view. This is what makes trading difficult. Show 100 traders the same chart and 90% of them will disagree on what they see and what the outcome will be.

SD

nosce te ipsum

You make your own opportunities in life.
Visit my futures io Trade Journal Reply With Quote
 
(login for full post details)
  #14 (permalink)
 Massive l 
Legendary Market Wizard
Portland, OR
 
Experience: None
 
Massive l's Avatar
 
Posts: 2,012 since Mar 2011
Thanks: 1,697 given, 4,189 received

I don't know about long term but so far simple directional trading has worked pretty well for me.

I have yet to place an option and have only hedged a couple of trades.

I plan to do more in the future. Always learning...

Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to Massive l for this post:
 
(login for full post details)
  #15 (permalink)
 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
Experience: Advanced
Platform: Custom solution
Trading: Futures & Crypto
 
Big Mike's Avatar
 
Posts: 49,961 since Jun 2009
Thanks: 32,433 given, 98,157 received



Please, continue...

Mike

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/

Visit other sites? Please spread the word about your experience with our community!
Follow me on Twitter Visit my futures io Trade Journal Started this thread Reply With Quote
 
(login for full post details)
  #16 (permalink)
 Bookworm 
Long Island, NY
 
Experience: Advanced
Platform: TOS & Tastyworks
Broker: TD Ameritrade
Trading: Equities, index options and futures options
 
Bookworm's Avatar
 
Posts: 175 since Apr 2010
Thanks: 65 given, 166 received

To me trading is the art of identifying those moments where the market has an edge, that is the odds of it moving in one direction rather than the others (don't forget to include sideways) is better than even and evaluating the potential reward to the risk necessary to take the trade. The classic example is what appears to be the end of a pullback in a trend.

Reply With Quote
 
(login for full post details)
  #17 (permalink)
 Rad4633 
Greensboro NC
 
Experience: None
Platform: TOS/ NT Dorman
Trading: ES TF CL
 
Rad4633's Avatar
 
Posts: 1,352 since Sep 2011
Thanks: 2,651 given, 892 received

@Gary D @Surly @Siler Dragon I agree with everyone, I m sorta new to this animal. But direction has the most rewards. How to execute direction is where the skill comes in. But up is up and down is down, sideways is the by product> This being said who is more profitable trend trading? day trader trading off of day charts or traders using 1min,2range,1500tick,4000volume or whatever they use? Noise,bots,hftm makes it harder in the short scope. Long scope would your wins far exceed ur losers? using the same trading technique for either trade with direction .
Has anyone just entered off a day candle and walked away with your stops in place then come back and look at it,human motion was eliminated. You can make more on paper being in and out but your success rate drops. Ie. hindsight ES fell 15 points down on a downtrending day, we'll say 5 steps down. so if you tried to enter on each step ur 1 pt late on entry and you loss a point on rev exit total net was 5 pts if you were day trading long you got all 15pts...

Thoughts?

Visit my futures io Trade Journal Reply With Quote
 
(login for full post details)
  #18 (permalink)
 Massive l 
Legendary Market Wizard
Portland, OR
 
Experience: None
 
Massive l's Avatar
 
Posts: 2,012 since Mar 2011
Thanks: 1,697 given, 4,189 received

Here's my simple directional trading stats 12/18/11 - 01/27/12
25 wins
16 losses
234 tick profit
122 tick loss
Profit Factor 1.99
Total Profit 112 ticks
Winning Percentage 61%
Avg. Win 9.36
Avg Loss 7.63
Expectancy 2.72

I traded quite poorly last week which lowered my stats in all areas. I did manage
to pull +10 ticks on the week though. A poor week but still positive

Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to Massive l for this post:
 
(login for full post details)
  #19 (permalink)
 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
Experience: Advanced
Platform: Custom solution
Trading: Futures & Crypto
 
Big Mike's Avatar
 
Posts: 49,961 since Jun 2009
Thanks: 32,433 given, 98,157 received


Massive l View Post
Here's my simple directional trading stats 12/18/11 - 01/27/12
25 wins
16 losses
234 tick profit
122 tick loss
Profit Factor 1.99
Total Profit 112 ticks
Winning Percentage 61%
Avg. Win 9.36
Avg Loss 7.63
Expectancy 2.72

I traded quite poorly last week which lowered my stats in all areas. I did manage
to pull +10 ticks on the week though. A poor week but still positive

@Massive l, can you comment on how many times per day you change direction?

Mike

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/

Visit other sites? Please spread the word about your experience with our community!
Follow me on Twitter Visit my futures io Trade Journal Started this thread Reply With Quote
The following user says Thank You to Big Mike for this post:
 
(login for full post details)
  #20 (permalink)
 Massive l 
Legendary Market Wizard
Portland, OR
 
Experience: None
 
Massive l's Avatar
 
Posts: 2,012 since Mar 2011
Thanks: 1,697 given, 4,189 received

I won't change direction at all if price is above
a certain price. Basically, if it's outside what I consider
developing price and into a buyer controlled zone (or seller controlled for shorts).
If price is inside development (usually on a 2hr chart), I may change direction 1-3 times/ day.

Visit my futures io Trade Journal Reply With Quote
The following 4 users say Thank You to Massive l for this post:
 
(login for full post details)
  #21 (permalink)
 gcaldridge 
port charlotte, florida
 
Experience: Beginner
Platform: NinjaTrader
Trading: Oil
 
Posts: 100 since Dec 2011
Thanks: 54 given, 79 received


GaryD View Post
Loosely quoting Big Mike; the trade is entered by itself, meaning you don't require any other trade in any other position to go a certain way in order for this trade by itself to be profitable. More complex trading would be, Spreads, Options, Hedges, Portfolio trading.

Expanding on that; Entering and/or exitting a trade in a single and immediate vehicle based on nothing other than what that particular instrument is doing. No correlations, no offsetting long/short strategies, no basket trades, etc. One on one.

If I can answer this more simply. Directional trading is placing a trade that will benefit if prices go in the direction you choose. If you think price is going in an upward direction, go long. Down, vice versa.

Sideways is also a direction and can be used by options players who make money if price stays (about) the same.

Whatever you do, you are placing your bet on what you think is going to happen.

The challenge then becomes determining how long you want to stay in the trade depending upon whether the price is going in your direction or not. Cut losers, let winners run.

Reply With Quote
 
(login for full post details)
  #22 (permalink)
 arnie 
Europe
 
Experience: Advanced
Platform: Jigsaw
Broker: Tradovate
Trading: Equities
 
arnie's Avatar
 
Posts: 824 since May 2010
Thanks: 722 given, 1,027 received

A guy can go crazy looking at a chart and thinking who's creating that move, OTF's, hedgers, spreaders, scalpers, and an infinite number of all other traders.

On my screens I have the S&P500 advances/decliners, the S&P TICK, the NQ, the YM, the XLF and the XLK representing the biggest sectors, all to give me some sort of "security" when trading the ES but at the end, when I hit the buy or sell in the DOM I'm not looking at those charts. The only thing I hear is the alert that I have in the TICK every time it goes above 250 since usually that indicates we'll see some sort of high in the ES in 1 to 3 minutes time and I don't want to go long on such periods.

So I ask myself why do I have all those charts up there? I'm only trading the ES. I'm only reading its chart and trying to figure out what information is that move giving me?

Many, many, many times I tend to go the opposite way of my initial reading because I hear my NQ or YM alerts saying to me that they are making news highs/lows and ES is really not following them. I go in ES thinking it will follow the other 2 and when I look, NQ or YM are rotating after that new high/low and I'm already down 1 or 2 handles in ES because it also rotated but with a vengeance. ES was weaker than NQ or YM and when they reverse ES just broke.

So why the hell do we need to follow other stuff when trading an instrument? This damn idea of security we want to have, a continuous confirmation loop that freezes us.

When we are targeting just a couple of handles we really don't need any other chart besides the instrument we are trading. Adv/dec, NQ, YM, XLF, XLK, all may be still, while ES moves 2 handles. If we are looking for some sort of confirmation for a move in ES we'll end up not trading at all, although, at the end of some days not trading at all would be preferable

If I become half a percent smarter each year, I'll be a genius by the time I die
Reply With Quote
 
(login for full post details)
  #23 (permalink)
 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
Experience: Advanced
Platform: Custom solution
Trading: Futures & Crypto
 
Big Mike's Avatar
 
Posts: 49,961 since Jun 2009
Thanks: 32,433 given, 98,157 received

And if you aren't scalping?

Sent from my Transformer Prime TF201 using Tapatalk 2

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/

Visit other sites? Please spread the word about your experience with our community!
Follow me on Twitter Visit my futures io Trade Journal Started this thread Reply With Quote
 
(login for full post details)
  #24 (permalink)
 indiantrader 
Mumbai, India
 
Experience: Intermediate
Platform: MT4, NT7,eSignal
Broker: AMP/CQG
Trading: Index,currencies
 
indiantrader's Avatar
 
Posts: 115 since Jul 2010
Thanks: 324 given, 150 received

I feel directional trading is profitable provided a trader develops a strategy with an edge for himself, restricts the trading to active market hours and have a good money management plan with fixed daily loss and profit limits.
However, I have read about professional traders groups like Dubai Professional Traders group who specliaise in future spreads and arbitrage. While trading spreads, one is always hedged in the markets and it is possible to trade big quantities with lesser margin. Also , selling the options is also part of such fund management firms.
In short, spreads, options are favourites of pros and most of retail traders are looking for that magic indicator that shows correct direction of market.

Reply With Quote
 
(login for full post details)
  #25 (permalink)
 arnie 
Europe
 
Experience: Advanced
Platform: Jigsaw
Broker: Tradovate
Trading: Equities
 
arnie's Avatar
 
Posts: 824 since May 2010
Thanks: 722 given, 1,027 received


Big Mike View Post
And if you aren't scalping?

Sent from my Transformer Prime TF201 using Tapatalk 2


I'm not fond of breakouts. Statistically speaking, over the years, breakout trading has been where I've lost more money but for those that trade breakouts, in a higher time frame, possibly hourly or even daily, might have some advantages when looking at NQ, YM, sectors, adv/dec, TICK and others.

If you have the financials and tech all inside the same range, a breakout would serve as confirmation for ES, NQ or YM. Adv/dec also would confirm with new highs/lows.

Yes, all this can also be used by scalpers. They can take advantage of that higher frame reading and grab a quick 2 handles or whatever the move gives them but that is where the problems begin. More often than not, breakouts generate false moves that will rotate for 2 or 3 handles, precisely where stops usually are resting for scalpers. That's why I tend to fade breakouts. I find them more rewarding.

But then again, do we really need to look at other instruments for this? We are looking at those other instruments for confirmation but that's not granted. You continue to have false breakouts. Heck, those same instruments might have been the ones giving the signal for a breakout that ended up to be a false one. So we are basically adding stuff that continuously distract us from what is really important, the instrument in which we are trading and the price and volume that is being traded there.

Please don't misinterpret me, knowing what is happening in other markets/instruments is important, the same way news are important so we can be up to date if all of a sudden some dramatic move happens or prepare us for a news pending. I just don't see a reason for it to be a constant focus of our trading strategy.

If we're trading ES, this should be our primary focus and not what NQ, YM, XLF are doing. There might be hedging between them but we cannot do anything about it. Hedging or not, the bars we're seeing in ES chart are the bars you need to focus. Those are the ones we're trading, those are the ones that will signal whatever they'll signal.

If I become half a percent smarter each year, I'll be a genius by the time I die
Reply With Quote
 
(login for full post details)
  #26 (permalink)
 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
Experience: Advanced
Platform: Custom solution
Trading: Futures & Crypto
 
Big Mike's Avatar
 
Posts: 49,961 since Jun 2009
Thanks: 32,433 given, 98,157 received

For sake of discussion, here is a simple chart of Citibank and JPM that I already had on my screen. The green line overlay is XLF by comparison.



The thread premise is "Is simple directional trading profitable" (long term). If you answer yes, then you would probably ignore XLF here and just trade the base instrument.

But what if your research indicated that JPM and C should return from their present divergence from XLF? Then would you consider a long underlying and short XLF (whatever the bear is) strategy, where the current gap spread between the base instrument and their sector should be closed?

Mike

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/

Visit other sites? Please spread the word about your experience with our community!
Follow me on Twitter Visit my futures io Trade Journal Started this thread Reply With Quote
 
(login for full post details)
  #27 (permalink)
 arnie 
Europe
 
Experience: Advanced
Platform: Jigsaw
Broker: Tradovate
Trading: Equities
 
arnie's Avatar
 
Posts: 824 since May 2010
Thanks: 722 given, 1,027 received


Big Mike View Post
But what if your research indicated that JPM and C should return from their present divergence from XLF? Then would you consider a long underlying and short XLF (whatever the bear is) strategy, where the current gap spread between the base instrument and their sector should be closed?

I always had problems doing that type of analysis. It's the same as comparing NQ with AAPL.

JPM and C are the third and fourth biggest companies in the sector. JPM weights 7.7% and C 4.5%.
We are talking about a sector that has 81 companies which 71 represents 50% of the sector and the other 10 represents the other 50%.

For a spread based trade you need to take in consideration all the 81 companies or at least the top 10. WFC and BRK alone weights 18% of the sector. They alone can mess your spread.

XLF may in fact "return to the mean", closing that gap spread but you need to know in which position the top 10 companies are in relation to the sector itself. If WFC, BRK, BAC, USB, AXP, GS, SPG, MET are all strong and JPM and C are lagging rest assure the gap will widen even more.

If I become half a percent smarter each year, I'll be a genius by the time I die
Reply With Quote
The following user says Thank You to arnie for this post:
 
(login for full post details)
  #28 (permalink)
 Big Mike 
Site Administrator
Swing Trader
Data Scientist & DevOps
Manta, Ecuador
 
Experience: Advanced
Platform: Custom solution
Trading: Futures & Crypto
 
Big Mike's Avatar
 
Posts: 49,961 since Jun 2009
Thanks: 32,433 given, 98,157 received

And speaking of methodologies other than simple directional trading, there is an absolutely fantastic thread on GTAA (Global Tactical Asset Allocation) here:



Mike

We're here to help -- just ask

For the best trading education, watch our webinars
Searching for trading reviews? Review this list

Follow us on Twitter, YouTube, and Facebook

Support our community as an Elite Member:
https://futures.io/elite/

Visit other sites? Please spread the word about your experience with our community!
Follow me on Twitter Visit my futures io Trade Journal Started this thread Reply With Quote
 
(login for full post details)
  #29 (permalink)
 abdunbar 
El Paso, Texas
 
Experience: Intermediate
Platform: Ninja
Trading: Euro
 
Posts: 25 since Jan 2011
Thanks: 28 given, 27 received

I would like to bump this thread. The original question was. Is it possible to be long term profitable by trading only a simple directional strategy.

I would like to further restrict the definition of simple to one entry. The only traders who I KNOW are profitable are two guys at a prop firm that I was with and they average down or as FT71 calls it campaign. I am not saying I don't think that others are profitable but these guys I have watched for a long time and I KNOW. They do have losing days and when they do the losses are big. Maybe one losing day per month and the loss is four days average profit. They trade stocks, use a lot of limit orders and work the positions.

But, most people who try this blow up. It is a difficult money management problem. And you still have to honor a daily dollar stop and have average daily gains that pay back the losing days quickly.

So as I said, I would like to further clarify the definition of Simple Directional Trading to mean One Entry. Multiple exit/scale out OK.

After all that, I think the answer is yes. When I look at my trading this year, I was definitely not profitable, the fault is psychological not a problem with strategy. I have a problem with revenge trading and not accepting risk. My problem is that I have the idea that I can be profitable every day. I will put together long strings of days where I make 200 to 500 dollars a day although some of these days were accomplished by breaking my max daily loss rule. Then after 10 or 15 days like this, comes the day when I don't recover from the violation of my max daily loss and I give back all the profit and more.

I think the difficulty of this thread is that the profitable traders do not have any interest in the topic and the unprofitable feel that they have nothing to offer.

The best answers so far in this thread were from Massive1.

It would be great to hear from profitable traders who can talk about their experience/expectation for profitable days percentage, ditto weeks and months. ratio of losing days to winning days, average losing day, average winning day. info could be given as percent of account.

Also would like to here about percent of entries that are limit versus market and percent of exits that are tgt versus trail.

I am going to redouble my efforts to prove that the system that I would like to trade, will be profitable. That perfect system for me, would 1) trade during US mkt hours 2) trade only one instrument 3) single entry, mkt order at confirmation 4) partial exit at 1 times risk 5) final exit at tgt or raised stop. 6) have a high winning day percentage 7) have a virtually 100% winning week percentage.

So is this asking to much?

Archie

Reply With Quote
 
(login for full post details)
  #30 (permalink)
 shortride 
Merced Ca USA
 
Experience: Intermediate
Platform: TDA
Broker: Datek :)
Trading: Futures
 
shortride's Avatar
 
Posts: 15 since Apr 2013
Thanks: 37 given, 9 received


abdunbar View Post
I am going to redouble my efforts to prove that the system that I would like to trade, will be profitable. That perfect system for me, would 1) trade during US mkt hours 2) trade only one instrument 3) single entry, mkt order at confirmation 4) partial exit at 1 times risk 5) final exit at tgt or raised stop. 6) have a high winning day percentage 7) have a virtually 100% winning week percentage.

So is this asking to much?

Archie

The only thing I would change is 2. I have found that only about 15% of a stocks move is predictable. That is what you doing, you are predicting a stock price is going to move up or down from where you enter. I think it is a mistake to limit yourself to one stock out of the 5000+ major stocks available to you.

Rather, limit yourself to one type of set up. Then, search all the major movers for that set up.

“Enter by the narrow gate; for wide is the gate and broad is the way that leads to destruction, and there are many who go in by it. Because narrow is the gate and difficult is the way which leads to life, and there are few who find it.
Reply With Quote


futures io Trading Community Traders Hideout > Simple Directional Trading profitable?


Last Updated on November 24, 2013


Upcoming Webinars and Events
 

NinjaTrader Indicator Challenge!

Ongoing
 

Journal Challenge w/$1,800 in prizes!

April
 

Seven Trading Mistakes Solved With Smart Trading Tools w/Brannigan Barrett

Elite only
     



Copyright © 2021 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts