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Sounds like you need more testing of your system in varying sessions. How does it work in chop? Maybe look at situations where the signals work the worst and see if you can find a way to interpret it, filter it, or define some rules on how to manage the trades taken in those situations or to not take any trades at all. As TIYF mentioned, also test your exits, s/l, and/or BE aspects of your system.
@Rudedog60, I think this list by @DarkPoolTrading really sums up well what it means to be a trader, and to accept the risk involved.
I agree 100% with every item except the last, which I disagree with 105% In my way of trading, the entry is the most important, even more so than the exit, because this is what the risk/size is based on. A good entry eliminates the "damn it, I was right, but got stopped out just before the move happened" problem that seems to be one of the biggest problems traders face. Don't get me wrong, everything is somewhat important, but to me, the entry is very high on the list of importance. I used to think the entry was the most important; then I shifted and thought the exit was, along with management; now, I'm back to feeling the entry is most important, because I realized that when the entry is good, the management is easier, and so is the exit, because the trader is working from a state of profit and not worried about losing. Still, my exits need a lot of work, but when the entry is good, then even a poor exit still usually yields a profit. Sorry for the tangent but IMO it's important.
Also, be aware that some traders do not really have a "signal." For example, I read the order book when I have an opportunity to trade at an attractive price, and use a little help from TICK and delta, but there is no signal. The signal is primarily the location, and these supporting tools give me the trigger to pull, but it is nothing objective.
Bottom line and back on topic: you can't know, so stop trying to know. I personally could not have faith in such a method as you are using, for the primary reason that it does not seem to take context into account at all; it treats each day the same as any other, unless you have not really included other parts of what you do. Also, from what I see trade location does not matter to you; but when you buy or sell anything in real life, the very first thing you want to know is the price, and whether it's cheap or expensive relative to similar items or the same item some period of time ago. It may work for you though, and that is all that is important. I think Mike's suggestion of back testing is a good idea if you are very mechanical, but it will not be that helpful if you use much discretion, because you cannot simulate discretion when there is no risk, and when there is no concept of time (one of the hardest things to do is hold a trade).
Most people on the forum that focus on trade entries are focusing on location, where to put the trade on. I see very little evidence they focus at all on sizing or risk, it is purely a price-based indicator-fueled decision.
This is what I refer to when I say entries are one of the least important aspects of being profitable.
Looking at panel 2, panel 3, panel 4 indicators for zero line reject, crosses, OS/OB conditions or etc, or panel 1 indicators like moving averages that create 'support' or 'resistance' zones, etc, is usually what people use when deciding when to put a trade on.
I see very few people ever talk about when to exit a trade. How much size to put on. What their risk is, where their stop is, or how to manage a trade after they enter --- with exception to people that like to use break-even stops (???) and people that like to use yet another indicator to tell them where their trailing stop should be.
In the end, methodology is a very personal thing. Obviously I am one that believes in fewer indicators the better, with more significance placed on bigger charts and clear areas of hand drawn support/resistance, and not relying on some moving average tool. I also trade charts that are probably 10-20x bigger than the average person on the forum, and it's because I can't stand those small fast moving charts any more. Maybe I am slow, stupid, or both --- but it doesn't matter. Methodology is personal.
The problem is, trade location isn't enough to be profitable. And few people realize it, fewer still focus on the remaining more important parts of profitability.
Every thing in trading is personal. Whether you scalp, position, or swing trade is personal. Whether you are indicator based, price action only based, candlestick based, or a pattern based trader is personal. Trade management is personal. Do you go all in and all out, do you scale in and scale out, do you routinely have 2 or three targets, do you risk a certain % of your account on every trade and place stops according to price action, how about a fixed stop regardless of price action. Is there truly a "right" way?
Me, I trade primarily from one chart that will contain at least 1/2 a days worth of data as I trade from the open (earlier if I can) until around noon or 1 pm cst. I use the 12 sma and stochastics and the modified wave indicator as shown above. I also have the previous day's close, high, and low and the daily pivot. My most important indicators are actually in a chart immediately to the left of the SPY chart...the advance/decline index and the tick. The SPY, not to mention the ES is not going to move in a contrary fashion to the advance/decline index. (I also will have longer time frame charts of the SPY and the vxx up as well.)
I scalp. My personality will not let me hold through retracements. It just won't. So I will scalp 500 to 1000 shares at a time. When I truly focus I come out ahead on a given day. It's when the tiniest bit of doubt comes in that I suddenly need additional subjective confirmation that "my signals" are good and I end up going long at the top or shorting at the bottom. That is the problem I have. That is when my account leaks slowly.
I think the problem comes from my educational background and career in a field where sometimes you rolled the dice, but more often than not you made decision that allowed you to take control of a situation and know what the outcome would be. Did that for over 25 years. After that amount of time, it is hard to embrace the uncertainty. But I value perseverance...and having a bit of ocd helps as well.
I agree with both you and Josh. Sizing isn't important to 1 contract traders. Their perceived risk is not to afford more than one contract or simply their account size won't allow it. Sizing is important when you're trading more than 1 contract. I think Josh is referencing style in his reply -- the long term trader verses the day trader.
Entry placement is about value to traders like Josh. Value traders can miss trades because they do not perceive value near their price but at their price to the tick. Value traders place great 'value' on entry.
Exits...well, patience yes is required. But I decided that I will let the market suggest when I should exit the trade. I hate a loss and would rather have a 1 tick winner than a 1 tick loser. Others calculate a target and will even take a loss or scratch on the trade even though they were in the money by 10 ticks or more. Longer term traders, like yourself, can mentally handle a large draw dawn based on your conviction the market will eventually move your way.
Scalpers, I do have to wonder about. I walked that road too long and am glad to be off of it. Not true of all scalpers but perhaps most, there is little understanding of market structure. Their trades are chaotic because they think the market is chaotic.
For myself, what a refreshing experience when I discovered I could "read" market structure, at least better than before and I am pulling together my knowledge of 13 yrs experience (read tuition payments to Market University) to improve. That "aha" moment when you begin to understand market structure and movement is a an awakening. Everyone who stays with it and literally pays the price for it eventually arrives at that place. I can only wish that I had learned it early, but I didn't. Suffering the agony of defeat has brought the thrill of victory (heard those words before...remember. Just switched the phrases).
If one is in a Combine or preparing for one, particularly the $30K, there isn't the luxury of discounting the contribution that disciplined entries make in your success. Or failure.
I believe it is Vank K Tharp who details an experiment he did were he entered randomly into the market (by coin toss). Based on his rules around money management, risk management, trade management he was able to make money over a certain number of trades.
I agree with @trendisyourfriend and @josh that entries are important, but they not the be all and end all of trading which is what most traders think. How often have you heard people say "Just tell me where to buy and ill do the rest". Well, the "rest" is what will determine long term success.
As you mentioned, context is critical and I would also not trust a system that was just based on a couple indicators with no reference to the current market environment. That is why I trade PASR.
Never the less, I still believe that once your system (what ever that system is and whether or not it takes context into account) sais that a valid trade entry exists. You take it every single time. Then comes the important aspects of long term success such as trade management, sticking to your risk and position sizing rules, and the psychology needed to stick to your plan.
Yes, and @FuturesTrader71 has similar demonstrations in his material and has discussed this at length in his futures.io (formerly BMT) webinars. Highly recommend watching them for those who haven't, even if you have no desire to learn about auction theory, the rest of the risk/discipline/trade management discussion is extremely worthwhile in each of the webinars.
I do belive that entries and exits are important. I have mostly focused on entries so now it is time to start working on trade management and exits. My question is, where can I start learning about this?
In my way of trading, the entry is the most important, even more so than the exit, because this is what the risk/size is based on. A good entry eliminates the "damn it, I was right, but got stopped out just before the move happened" problem that seems to be one of the biggest problems traders face. Don't get me wrong, everything is somewhat important, but to me, the entry is very high on the list of importance. I used to think the entry was the most important; then I shifted and thought the exit was, along with management; now, I'm back to feeling the entry is most important, because I realized that when the entry is good, the management is easier, and so is the exit, because the trader is working from a state of profit and not worried about losing. Still, my exits need a lot of work, but when the entry is good, then even a poor exit still usually yields a profit. Sorry for the tangent but IMO it's important.
