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Will order flow help?


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Will order flow help?

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  #1 (permalink)
Melbourne
 
Experience: None
 
Posts: 2 since Aug 2020
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I've been doing PATS and been somewhat profitable so far (2 months). But the 2:1 risk reward sucks when a losing trade wipes out 2 and a bit winners after commission.

I've been doing a lot more limit orders to lower the risk but I miss out on a lot of moves because of this.

I'm considering learning order flow to:
1. Tighten stops
2. Keep me out of more bad trades
3. Ride momentum longer

Mainly wondering whether I should direct my attention to order flow now, or try and get even better at reading charts.
My concern is that a few months down the line, if I went the chart route and then decided to go orderflow, I'd have even more bad habits to unlearn.

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  #2 (permalink)
Legendary Market Wizard
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creamyyy View Post
I've been doing PATS and been somewhat profitable so far (2 months). But the 2:1 risk reward sucks when a losing trade wipes out 2 and a bit winners after commission.

I've been doing a lot more limit orders to lower the risk but I miss out on a lot of moves because of this.

I'm considering learning order flow to:
1. Tighten stops
2. Keep me out of more bad trades
3. Ride momentum longer

Mainly wondering whether I should direct my attention to order flow now, or try and get even better at reading charts.
My concern is that a few months down the line, if I went the chart route and then decided to go orderflow, I'd have even more bad habits to unlearn.

Good question! Here's my 2 cents: do what makes you happy, rather than what you think you 'should' do. That's the main thing, and it's not just an answer to this question.

Technically, I think it's far easier to be profitable as a chart reader, but I am speaking for myself.

Happy Trading!

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #3 (permalink)
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creamyyy View Post
I've been doing PATS and been somewhat profitable so far (2 months). But the 2:1 risk reward sucks when a losing trade wipes out 2 and a bit winners after commission.

I've been doing a lot more limit orders to lower the risk but I miss out on a lot of moves because of this.

I'm considering learning order flow to:
1. Tighten stops
2. Keep me out of more bad trades
3. Ride momentum longer

Mainly wondering whether I should direct my attention to order flow now, or try and get even better at reading charts.
My concern is that a few months down the line, if I went the chart route and then decided to go orderflow, I'd have even more bad habits to unlearn.

Before you start adding new methods and new stuff to your charts -- which will tend to complicate your decision-making by giving you more things to consider -- I suggest you simply look at that PATs 2:1 ratio. Having a loss tolerance that is twice your profit target means you have to be very, very right, and almost all the time, or, as you have said, one loss wipes out more than two profitable trades.

For example, look back and see what the result of either a closer stop or a target that is further out would have been.

Having a large stop loss and a small target is pretty much going to have you grab any small profit, often way too soon given the subsequent price move, while riding out a larger loss, and then taking it. This does play into the common fear that all traders have (which does not actually go away, but which does get more bearable ) of seeing your profits disappear, while being unwilling to just take a loss. This, if you give it too much emphasis, is an account-killer.

I suggest trying different profit/loss ratios, looking back in hindsight, and then see how it works out in real time.

Also, how committed are you to short-term scalping? Trying for 8 ticks in ES can certainly be done and can be profitable, but take a look at the size of the moves in ES lately. (!)

This aside, I simply don't suggest pouring a lot of new things onto your charts. Start with simple and small changes and see what is helpful. The thing that has always stood out for me with the PATs system, as usually implemented, is its odd profit/loss ratio, so I suggest looking there first.

Also, I haven't read anything of Mack's for a long time, but I do think he mentions that your stop could be placed elsewhere than always the 16-tick level, depending on what's on the chart. There are also many other price action trading approaches, and I haven't seen any (or any others) with this stop/target placement. It is generally more usual to place your stops and targets based on things like support and resistance, or other chart features. You may want to think in these terms as well, but be aware that anything that involves more thinking about what to do, while you are making trading decisions, can quickly over-complicate things and be worse than before.

Again, try small changes first and see how they go for you. And good luck with it.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
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  #4 (permalink)
Capt. Johnny Jameson
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I agree totally with @bobwest. He is on point with his response. A 2:1 isn't going to work in your favor in the long run. Also, I use order flow in my trading, and it is definitely the frosting on my cake....but there are many different order flow products out there, so it's not just deciding to use order flow, it's which one? The other thing is that there is a pretty steep learning curve to using it correctly. Not something you can buy on friday and trade on monday. Keep in mind that order flow in itself is a trading methodology. Food for thought.

wish you the best!

Johnny

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  #5 (permalink)
Melbourne
 
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Thanks for the advice all. It's a good thing I've been journalling all my trades and also tracking the highs and lows in the 2 minutes after each trade.

Just a quick look at my journal shows that on my winning trades the average draw down is 25% and updraw is 144%. Definitely looks like I'm leaving a bit on the table. I'll work on tightening the stops and increasing profit targets

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  #6 (permalink)
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creamyyy View Post
Thanks for the advice all. It's a good thing I've been journalling all my trades and also tracking the highs and lows in the 2 minutes after each trade.

Just a quick look at my journal shows that on my winning trades the average draw down is 25% and updraw is 144%. Definitely looks like I'm leaving a bit on the table. I'll work on tightening the stops and increasing profit targets

Good.

You are also welcome to start and maintain a journal here on futures.io, in either the Trading Journals or the Elite Trading Journals sections (see the main page of the site for links.)

Now, I will be the first to say that a public trading journal can drive you crazy. You (or at least, I ) may tend to pay way more attention to what you (I) imagine others will think of what you have to say or what you did, and not focus on the trading itself. But also, a public journal, since it is public, can force you to be more objective, more honest, and more personally accountable for your trading. Somewhere or another, @Big Mike has said that if you can't explain to others why you took a trade or what your rules are, you probably don't understand it yourself either, or something like that.

Just take this as an invitation, and feel free to decline. But you may also want to first take a look at what some of the other members are doing in their journals, and see if it is helping them. In many cases, it is. Then you may want to decide if it might help you as well.

One thing about this site is that the members will be pulling for you and will want you to succeed. So it may make sense to lean on that and make use of it. It is freely given.

Bob.

When one door closes, another opens.
-- Cervantes, Don Quixote
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