A Time Traveler and a Trade - Traders Hideout | futures io social day trading
futures io futures trading


A Time Traveler and a Trade
Updated: Views / Replies:1,101 / 22
Created: by lax99 Attachments:0

Welcome to futures io.

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

futures io is the largest futures trading community on the planet, with over 100,000 members. At futures io, our goal has always been and always will be to create a friendly, positive, forward-thinking community where members can openly share and discuss everything the world of trading has to offer. The community is one of the friendliest you will find on any subject, with members going out of their way to help others. Some of the primary differences between futures io and other trading sites revolve around the standards of our community. Those standards include a code of conduct for our members, as well as extremely high standards that govern which partners we do business with, and which products or services we recommend to our members.

At futures io, our focus is on quality education. No hype, gimmicks, or secret sauce. The truth is: trading is hard. To succeed, you need to surround yourself with the right support system, educational content, and trading mentors Ė all of which you can find on futures io, utilizing our social trading environment.

With futures io, you can find honest trading reviews on brokers, trading rooms, indicator packages, trading strategies, and much more. Our trading review process is highly moderated to ensure that only genuine users are allowed, so you donít need to worry about fake reviews.

We are fundamentally different than most other trading sites:
  • We are here to help. Just let us know what you need.
  • We work extremely hard to keep things positive in our community.
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts.
  • We firmly believe in and encourage sharing. The holy grail is within you, we can help you find it.
  • We expect our members to participate and become a part of the community. Help yourself by helping others.

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

Reply
 
Thread Tools Search this Thread
 

A Time Traveler and a Trade

  #21 (permalink)
Denver
 
Trading Experience: Intermediate
Platform: Bookmap and Jigsaw DOM
Broker/Data: Stage 5 Trading
Favorite Futures: ZN
 
lax99's Avatar
 
Posts: 433 since Jun 2015
Thanks: 623 given, 809 received


tpredictor View Post

This is a "false choice problem". How much action/information are you able to infer from 1 tick? And what certainty can you scratch a trade for only 1 tick of risk? That's what matters. Let's just say, I think discretionary traders in today's markets unlikely to be able to scratch many trades effectively.

Your ability to improve results as action develops is based on the efficiency of the markets and ability to integrate Bayesian probability theory. If every trade is a unique event then you cannot improve your results from knowledge of prior trades. You can only do that if the trades have dependency.

I mean the way this question is posed is would you rather lose $12.50 on a trade or $100? If all things are equal, I will prefer the small loss because the standard deviation of returns will be lower.

I feel like we're speaking two different languages and I'll do my best here to reconcile them (or at least present my understanding of our difference in opinion).

Here's an example from two weeks ago: ZN was selling off pretty hard and I saw the first spot where it paused. Not only did it absorb like five or six thousand contracts on the low, but it lifted 1500 up into the offer and it went bid. I tossed my bid in at the tick lower where the 5-6k had traded. I got filled long and I watched it dance higher by about a tick before going offered again.

I was able to infer a TON of information from the 1 tick difference in price--this is a nice characteristic of thick markets--which I'll describe here. For argument's sake, I'll say I was long at 05. The market had traded like 15,000 at 05 and about 3,000 had lifted into 06. There was a bid of 6000 at 04, which is 1 tick lower than my entry long. The market suddenly ticked against me, so it was 04 bid x 05 offered. The volume wasn't enormous; maybe 1,100 or 1,200 had sold into 04, but the bid of 6,000 had plummeted to 2,000.

All I had to risk was 1 tick to know that I was wrong. I thought I was aligned well with buyers who would drive the market up a couple of ticks. As soon as it ticked lower, all of the bids below me vanished. I hit out for -1 and the market ended up cracking 4 or 5 ticks. There was no need for me to risk any more on that trade because I was dead wrong on the call.

I think part of the reason for our difference in belief is probably because we trade different markets. One tick in ES doesn't mean much. One tick in ZN means a ton.

To the second point: Improving your trading isn't a matter of market efficiency and integrating graduate-level mathematics into the choice to click buy or sell. Improving your trading is all about seeing hundreds of trades (which are each unique, but human behavior follows patterns) and just spending time trading your market.

And finally: Once again, we're talking apples and oranges. I'd rather lose $12.50 on one trade instead of $100. But what about a string of trades? That was the root of my original question...

Reply With Quote
The following user says Thank You to lax99 for this post:
 
  #22 (permalink)
North Carolina
 
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
 
Posts: 644 since Nov 2011

@lax99 Yes, I have did something similar many times ES too-- even taking zero ticks risk on many trades. It is possible to trade, also, with extreme precision on the ES. Yes, I understand what you are trying to say but still even if you can often do this unless you're trading with 1 tick stops then you are allowing for possibility of greater risk. This idea you have is very similar to my concept of "market cognition" as to how price discovey works.

As for your question, it is always going to be the case that it is better to lose a smaller amount per trade if the edge per trade is the same. A string of trades or one trade doesn't matter: if your edge is the same and the trades are independent.

Now, as I shared before, if you are trading on a different, longer, fundamental wavelength of information then it may be better to take more ticks of risk.

One way to think about this is a ratio of information. If your trading with 1 tick stop loss, you will most likely be targeting at most several ticks. If you were targeting 4 ticks, you have 1:4 risk/reward and your tick is basically 25% of the information. On the other hand, if you were targeting 10 ticks of profit, your tick 1 tick is only 10% of the information in terms of the range.

If you are trading in a statistical manner and treating each trade as an independent event then it really doesn't matter if you take 8 losses of 1 tick. What you may be grappling with is if you are not trading in a statistical manner, and I'm just conjecturing here, if you take a 1 tick loss but it doesn't invalidate your hypothesis for the trade and you take a series of losses. Let's say you take 8 losses in a row: you have a dependency on the original hypothesis. Serially correlated losses are a very serious matter because they can cause you to lose more with stop losses then without taking stop losses when the horizontal movement exceeds the vertical expansion. Also, if you are trading 8 losses of 1 tick on the same thesis and then let's say the idea works out. You do not limit your loss to the same because you have to re-enter which can cost you at least another tick.

In summary: it is obvious if you can risk less per trade with equivalent edge then that is the better thing to do. On the other hand, if your trades are dependent and/or become serially correlated then it can be a serious matter. So to answer your question: I would always choose to lose only 1 tick per trade if my edge is the same versus 8 ticks. But simply even speaking of 8 ticks of losses of 1 tick, you are peeking into the future so to speak to know that and/or you may be implying the losses are serially correlated. Serial correlation is a serious risk when trading with tight stops: in that case, I would prefer to take 8 ticks as a single loss.

Now for a bit of a tangent but may be useful, it may help to understand or think about accuracy, precision, persistence, and uncertainty. I have saying: "The market judges one according to one's claims." Meaning simply, if you try to trade with 1 tick stop loss you will win or lose based on how well you can do that: if you trade with a larger risk then that will determine how well you can do. It is a common fallacy to believe that one can predict the market by looking at the longer trend. Even if or when true, the precision is often too poor to make any exceptional profits. On the other hand, as you zoom in, yes you should be able to make more precise predictions but the problem becomes uncertainty. For example, let's say your fundamental wavelength of information is a daily bar. Most of the noise one can imagine is filtered out at that view compared to say if your edge is only a few ticks. While you may have a precise edge when trading with a few ticks, even a single large trader with more capital could game you by simply discovering your edge, the optimal stop, then running it and taking the profit. Basically edges on longer time frames are probably going to be more stable but your information is more stale and less relevant. On shorter time frames, your information is more recent and better but greater uncertainty comes into play due to very temporal nature of things.


Last edited by tpredictor; May 20th, 2018 at 05:16 PM.
Reply With Quote
 
  #23 (permalink)
Legendary Market Wizard
New Orleans, La (Mardi Gras City)
 
Trading Experience: Advanced
Platform: NinjaTrader
Broker/Data: Ninjatrader / Optimus Futures / AmpFutures
Favorite Futures: ES / 6E / 6B / CL
 
DavidHP's Avatar
 
Posts: 1,250 since Aug 2009
Thanks: 6,286 given, 2,083 received



lax99 View Post
I saw something interesting going around Twitter the other day and I wanted to see how different traders would consider this.

Suppose you're in a trade and a Time Traveler appears in front of you. The Time Traveler has seen the future, and tells you "Your current trade has an 80% chance of quadrupling your net worth and a 20% chance of losing your net worth". He then disappears in a flash of light and you're left staring at your platform with a trade currently sitting at scratch.

What do you do? Do you scratch the trade or do you keep it on, and why?

First of all...
The time traveler picked the wrong trader.

I would never put myself into a trade that risks that much.
He is not from the future but is just a figment of your imagination and hypothetical situations seldom reflect reality.

If the trade goes against me I would lose only the amount that I have already determined would be risked on the trade.
The loss of my entire net worth would not be at stake. (This is not Las Vegas)

If the trade goes in my favor, I could quadruple my net worth but if it went in my favor I would have already moved my stop to break even or better so the 20% chance of loosing just disappeared.

Rejoice in the Thunderstorms of Life . . .
Knowing it's not about Clouds or Wind. . .
But Learning to Dance in the Rain ! ! !
Follow me on Twitter Reply With Quote
The following 3 users say Thank You to DavidHP for this post:

Reply



futures io > > > A Time Traveler and a Trade

Thread Tools Search this Thread
Search this Thread:

Advanced Search



Upcoming Webinars and Events (4:30PM ET unless noted)
 

futures io is celebrating 10-years w/ over $18,000 in prizes!

Right now
 

$1,000 in Amazon Gift Cards being given away right now from GFF Brokers

Right now
 

$250 Amazon Gift Cards with our "Thanks Contest" challenge!

Right now
 

Show us your trading desks and win over $5,000 in prizes w/Jigsaw Trading

August
 

Webinar: Suri Duddella (TBA)

Elite only
 

Webinar: Richard Bailey (TBA)

Elite only
     

Similar Threads
Thread Thread Starter Forum Replies Last Post
What is the best time to trade CL? FKtrader Commodities Futures Trading 24 January 20th, 2018 02:24 AM
What time zone do you trade? h4cked Traders Hideout 5 April 30th, 2014 11:01 AM
Best time to trade dominipip Stocks and ETFs Trading 6 April 10th, 2014 11:39 AM
Is the 6E 12.50 a tick? Best time to trade it Texas time? skyfly Currency Futures 7 August 7th, 2011 09:49 AM
Making an already existing strategy only trade from a certain time to a certain time jmejedi The Elite Circle 6 February 8th, 2011 03:19 PM


All times are GMT -4. The time now is 05:47 PM. (this page content is cached, log in for real-time version)

Copyright © 2019 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