@arnie, it's also the slippage that is the killer. Some people forget about slippage altogether. Every time you hit that market button prematurely it's costing you money. If you have time a good idea is keep a track of this in your journal. For example detailing trades you prematurely exit, whether the decision to exit would have resulted in a win or a loss and the various transaction costs. That's is how I identified the issue.
I have a complete record of commissions and slippage on all of my trades. Once I started to really focus on expenses and started to optimize my transaction costs with my targets the improvement in my trading results was profound.
Part of this process was to put a complete stop to exiting prematurely as it was affecting my return from higher transaction costs and also lost opportunity (ie. after I exited price would turn around and hit my original target).
All of my entries are based on signals but once in the trade it is managed by an ATM strategy which will manage the exit criteria automatically. Having said that the trade is only exited in very rare circumstances.
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Thank you your continuing support of this thread, also one should be aware of flipping, even if you are a scalper and you are wrong and flip there is a 2 tick slippage incurred on top of the amount you went to prove you were wrong. This is my personal experience through 3 different brokers when I reversed my position. I dont think most traders realize this when they flip until they see their PnL displayed when trade is over.
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I am surprise this subject rarely brought up in this forum, maybe most are swing or position trader. For a short term trader this is one of the problem faced when managing trade. You have to change your opinion about the market and manage your risk when you are on the wrong side of the trade. You dont want risk to exceed the limit of your trading plan.
For trader trading longer time frame, when a trade didnt go as plan theres a risk management function in place that limit the trade from excessive loss and the trader wait for the next trade setup to happen.
I don't think anyone can say who makes more money. There are scalpers who do very well, day traders with higher point targets that do very well, swing traders that do very well. There are also a whole lot of people who lose quite a bit of money using any of these styles.
There are so many ways to make money in the market and so many ways to lose it. I don't think anyone style can be classified as making more than another especially since that is a metric that would be hard to measure. I don't scalp but just because I do well with my style does not mean it makes more than another style. A great read is the Market Wizard series which I am sure many have read here. If there is anything to learn in those books is people make money in the markets in diverse ways.
"The day I became a winning trader was the day it became boring. Daily losses no longer bother me and daily wins no longer excited me. Took years of pain and busting a few accounts before finally got my mind right. I survived the darkness within and now just chillax and let my black box do the work."
Last edited by liquidcci; October 18th, 2012 at 10:44 AM.
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Thx for the reply, also I ll throw this one no one talks about the trader who waits for trend days scales in loads up and makes his year of those few days. I know one who does this, there are many ways you have to find your way. Thanks Again
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More theoretical spreadsheets. Ok, Firstly, I don't know who is Anagami, and don't know what gives him/her the credential to classify beginner/competent/expert traders etc. From my perspective, those are assumptions that may or may not have anything to do with reality. To me, any deductions derive from these, are questionable at best.
Ok, let's get back to reality. Firstly, when you mention 30%, 60% etc, I think you are talking about win ratio, not expectancy, so I'm going to assume that to be the case. With the original spreadsheet, in real life, if you are a scalper and you are trading 7 different instruments at the same time, not only you need to re-evaluate your trading approach, you possibly need to have your head examined. Numbers derived from such an approach is not based on reality.
To be successful as a scalper you need to have a higher win ratio then a swing trader because your risk reward ratio will be smaller, so why are we calculating numbers for scalping methods with 30%, 40% win ratio? Given typical 1:1, 1.5:1, 2:1 real life scalping risk rewards? That is a futile exercise, and conclusions drawn from that have little value.
Also, in your second spreadsheet, is the scalper trading 1 contract, and the swinger trading multiple contracts (given that he has multiple targets)? Is that a worthwhile comparison when looking at profit numbers? But, I may be looking at the spread sheet layout wrong.
I'm glad you showed a chart with theoretical trades. That's good, but I'm assuming that like most you are a discretionary trader. So my question is, how likely is it that you would have traded these theoretical trades optimally enough to even approach the theoretical numbers you are relying on? If you chicken out on any of the targets, or move your stop too soon, etc. etc. Those numbers that you so painstakingly crafted, go right out the window, because reality just caught up to you.
I'm not questioning who makes more money, I just think the relevance of determining these numbers like this is misleading. I think that can only be determined realistically by comparing 2 real life specific methods, and it can go either way depending on the specific systems. Here's a suggestion, choose a trading day, any trading day, and determine the profitability for that trading if you were to trade absolutely perfectly with your chosen swing method, then we'll compare that to a scalping method trading the exact same day. Or, just apply your day/swing method to the charts that I posted in the other thread.
Last edited by monpere; October 18th, 2012 at 12:08 PM.
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I think I mentioned this was merely an example in the last post.
The point is the win ratio must be higher to cover the horrendous transactions costs. I'd be surprised that many scalpers can achieve a 2/1 risk/reward ratio and anything higher than a 40% win ratio. If they can't achieve that they will blow up. We know this likely to be the case because most retail traders are scalpers and 90% of that group lose all their money or quit.
All this shows is an optimized swing strategy v an unoptimized scalping strategy. From what I can see our approaches are fundamentally the same. We both front run the swing but use different front run criteria. I'm suggesting the swing approach is optimized for transaction costs hence the larger targets whereas the scalping strategy is potentially leaving quite a bit of money on the table. Why have 2 new bosses (broker and market maker) and pay for their BMWs when they could be parked in your garage?
It's a good point. First point is I'm trading 7 instruments (ES, FDAX, NQ, CL, GC, 6E and TF). This multi-instrument approach has revolutionized my trading in the sense that I'm able to assess signal strength and make a choice of which instrument is more likely to result in a positive outcome. I use some volume profile for this (See below).
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For example if we look at oil right now we can see it in a fairly balanced state with a fairly symmetrical distribution. I'm going to be much more interested in signals generated with confirmed rejection at the fringes of the value area than anywhere else. I did have a signals on oil but trade location was wrong.
Because signals are only generated based on historically volatile periods of the night/day it requires a 24 hour approach.
For example if I'm looking at the FDAX and gold and they support a trade based on the current volume profile before I go to bed I will set alerts which will flow through on my tablet through teamviewer and wake me up on a signal. I've usually got time to get up as price moves around. I only ever use limit orders. These targets are set through ATMs and I've made it so they cannot be changed. I can close the trade prematurely which I was doing on occasion but have stopped this ill-disciplined practice completely. The biggest issue is not getting filled with the limit orders.
All I'm doing in these posts is putting forward an opinion that the smaller the targets people trade the higher the transaction costs. The higher the transaction costs the better the skill level required to cover these costs. If it helps someone great. I'm certainly not trying to prove a point that any system is superior to another. I'm not sure an example will help too much. I can pick a day which has 2 winners on 4 contracts on oil which is $3600. You could have a day with 20 winners and no losers.
Last edited by djkiwi; October 18th, 2012 at 05:15 PM.
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We all know your a excellent scalper, and if you would answer this question for me. From your experience and possibly experience of other scalpers, do ya trade using only one time frame which is usually smaller?
If one gives this further thought one could say you could scalp using medium time frames as well, your targets would be greater as well as your risk, @Gary Im sorta thinking of you, am I correct?
I appreciate all the charts and info you have supplied and if one isnt a skilled scalper they better take note of your spreadsheets before they find out the hard way, many thx again. I am still undecided as to the way I want to make money in the markets, I do like scalping 2 pts a day with the ES and be done in a hr or less, and I can honestly sit down and take a solid trade at any time of the day scalping. I can also trade for more if I want, its up to me Ive been scalping like this for 6mths or so. I have larger charts that give me a bias to direction. I did take one trade for 12 pts off my big charts a few weeks back it just depends on my feel. But as you noted commissions(which doesnt concern me) but slippage does, I noted in a reply a few posts back if one flips which you will have to do at some time or another if you scalp IMO, you have a additional 2 ticks of slippage incurred with compounds to the amount you went to prove the trade wasnt going to work out.
All this being said Swing trading is definitely easier since you give yourselves a very large room for error, but if you cant trade, a trader will still fail at swing trading, other than slippage scalping and swing are the same to me. But the whole point of this thread was "SHOW ME THE MONEY" movie quote Core data is hard to come by in trading, I was hoping there were articles, rankings etc out there somewhere,lol
In closing I want to note I am full time trader that depends on my trading income, most dont as you already know
Thx again for everyones input
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