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Uncertainty & Recent Volatility: Good or Bad for your own personal trading?


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Uncertainty & Recent Volatility: Good or Bad for your own personal trading?

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  #1 (permalink)
 Big Mike 
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Hi guys,

(far past) Time for a new poll!

Uncertainty & Recent Volatility: Good or Bad for your own personal trading?

Total votes: 724
 


Please vote & discuss.

Mike

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 bobwest 
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It's been good. I'm no good at all in tight ranges, but big moves that I can ride for a while will get me out of the trouble that I get in from being whipsawed by shorter moves.

If I can just believe in the move long enough to hold on....

Bob.

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 petebaksh 
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Agreed. I like to scalp and tight ranges ruin the risk/reward for my style of doing it. Lately there are lots of opportunities to ride bigger winners without changing stops too much or even safely add to winners for another leg in a bigger move.

As for holding on... that's something I am seriously working on...

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 Airsoftor 
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 CFLETCHALL 
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Can?t make an money without volitility! If the market is always flat how would you make money. ?

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redbarntrades
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CFLETCHALL View Post
Can?t make an money without volitility! If the market is always flat how would you make money. ?

In those situations, if you know what the duration of the consolidation might be, you can go over to Nadex and put on a spread.

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 chipwitch 
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bobwest View Post
It's been good. I'm no good at all in tight ranges, but big moves that I can ride for a while will get me out of the trouble that I get in from being whipsawed by shorter moves.

If I can just believe in the move long enough to hold on....

Bob.

When I re-entered trading a few months ago, I did so with the intent to scalp. With your encouragement, I traded my live account for two weeks. My trades went very quickly from trying to scalp to riding a 20 or 30 point win in the MES. I experienced the same thing... namely, that trades I got whipped around in would put me behind only to be at least partially redeemed with a long run in the afternoon. It seemed like the only way I could make money is looking for those swings. I was content with that initially. But one of the many strategies I was preliminary backtesting looked very promising. Great equity profile. About even stats on long and short trades so I started doing more intensive backtesting and went back 2 years. The equity curve was nearly all red until just the beginning of the year when it turned green.

My initial analysis was that it was only due to the recent volatility that my strategy was working. That choppiness was a killer. That may have been (and probably is) the wrong analysis but it made me consider what I do going forward in anticipation of those choppy times. It seemed to me that having only one trading strategy, trading swings with a low percentage win rate, was a recipe for disaster. Choppy times will return. I lost what little nerve I had and am pursuing a scalping strategy again as a hedge for that time whenever it comes. I am worrying about the future and missing out on good opportunities now as a result... but this has always been my MO in life, for better or worse.

How does your trading differ, what do you do to hedge (if any) during the chop?

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redbarntrades
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chipwitch View Post
When I re-entered trading a few months ago, I did so with the intent to scalp. With your encouragement, I traded my live account for two weeks. My trades went very quickly from trying to scalp to riding a 20 or 30 point win in the MES. I experienced the same thing... namely, that trades I got whipped around in would put me behind only to be at least partially redeemed with a long run in the afternoon. It seemed like the only way I could make money is looking for those swings. I was content with that initially. But one of the many strategies I was preliminary backtesting looked very promising. Great equity profile. About even stats on long and short trades so I started doing more intensive backtesting and went back 2 years. The equity curve was nearly all red until just the beginning of the year when it turned green.

My initial analysis was that it was only due to the recent volatility that my strategy was working. That choppiness was a killer. That may have been (and probably is) the wrong analysis but it made me consider what I do going forward in anticipation of those choppy times. It seemed to me that having only one trading strategy, trading swings with a low percentage win rate, was a recipe for disaster. Choppy times will return. I lost what little nerve I had and am pursuing a scalping strategy again as a hedge for that time whenever it comes. I am worrying about the future and missing out on good opportunities now as a result... but this has always been my MO in life, for better or worse.

How does your trading differ, what do you do to hedge (if any) during the chop?

Greetings, what do you consider to be chop?

What do you consider to be scalping?

Can you post a chart and highlight the areas that you consider to be chop using your trading chart and/or anchor chart as chop is open to interpretation.

Have you considered trading level to level? I highlight PIVOTS on the MES using a 40 tick renko chart which transposes onto my anchor (1000tick) and my 4 tick renko chart. I scalp between levels and intermediate S&R's but then may ride out breakouts if there is open space to the left.

My scalps average out 1/1 with an 80% =/- win rate. Yes, taking a position can yield some great results, but for me, scalping short term 3-5 points over and over again suits me just fine. I had to get over the times when I did not jump on the train and miss some big move. I finally came to the realization that increasing my account balance was more important to me that being some trading god that can get these daily big moves.

Cheers from Montana!

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 chipwitch 
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redbarntrades View Post
Greetings, what do you consider to be chop?

What do you consider to be scalping?

Yes, both of those things are subjective. I don't have any particular definition in mind. Scalping can be anything from a couple ticks to 10 points I suppose (ES). Basically anything short term, under a couple minutes is how I see it. No hard fast rules. Me personally, at the moment, I'm looking to just get 4 to 8 ticks. This is a trial basis, mind you.


Quoting 
Can you post a chart and highlight the areas that you consider to be chop using your trading chart and/or anchor chart as chop is open to interpretation.

Have you considered trading level to level? I highlight swings on the MES using a 40 tick renko chart which transposes onto my anchor (1000tick) and my 4 tick renko chart. I scalp between levels and intermediate S&R's but then may ride out breakouts if there is open space to the left.

I would say "yes". I attempted to. I wasn't successful with it.

I'm still trying to find my strategy. The 4 to 8 ticks is what I attempted when I first got back to trading and wasn't having much success with it paper trading. My stops usually had to be out 8 to 10 points to get a couple points. My win rate wasn't up to that kind of spread. At that time I was only trading on tech analysis of candlesticks. But I would also have up a Heikin Ashi 1-minute. I relied heavily on a 2 tick range chart with T&S based indicators I created for fine tuning entry and exit. I could go into a lot more detail about that strategy, but essentially it just wasn't working for me so I won't bore you with it.

I would try to identify levels using basic tech analysis but that is also subjective. Obviously I wasn't doing very well with it. I've since been studying using the DOM/Ladder and the results look promising, though I've only just started.


Quoting 
My scalps average out 1/1 with an 80% =/- win rate. Yes, taking a position can yield some great results, but for me, scalping short term 3-5 points over and over again suits me just fine.

That's pretty impressive! My preliminary tests with DOM are coming in between 70-80% with almost a 1/1 r/r. But there's room for improvement. I need to do a lot more study. The DOM gives me a pretty high degree of confidence what will happen in the next 20 seconds, but I'm still cautiously optimistic.


Quoting 
I had to get over the times when I did not jump on the train and miss some big move. I finally came to the realization that increasing my account balance was more important to me that being some trading god that can get these daily big moves.

Cheers from Montana!

I can relate. Catching a 30 point move is a rush and saved my day a couple times in my 2 weeks of live trading. But, like you, I think I can come to terms with missing out on those as long as my account size increases at the end of the day.

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 bobwest 
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chipwitch View Post
When I re-entered trading a few months ago, I did so with the intent to scalp. With your encouragement, I traded my live account for two weeks. My trades went very quickly from trying to scalp to riding a 20 or 30 point win in the MES. I experienced the same thing... namely, that trades I got whipped around in would put me behind only to be at least partially redeemed with a long run in the afternoon. It seemed like the only way I could make money is looking for those swings. I was content with that initially. But one of the many strategies I was preliminary backtesting looked very promising. Great equity profile. About even stats on long and short trades so I started doing more intensive backtesting and went back 2 years. The equity curve was nearly all red until just the beginning of the year when it turned green.

My initial analysis was that it was only due to the recent volatility that my strategy was working. That choppiness was a killer. That may have been (and probably is) the wrong analysis but it made me consider what I do going forward in anticipation of those choppy times. It seemed to me that having only one trading strategy, trading swings with a low percentage win rate, was a recipe for disaster. Choppy times will return. I lost what little nerve I had and am pursuing a scalping strategy again as a hedge for that time whenever it comes. I am worrying about the future and missing out on good opportunities now as a result... but this has always been my MO in life, for better or worse.

How does your trading differ, what do you do to hedge (if any) during the chop?

It's a simple fact of life that the market does whatever it wants, and that no one strategy will always succeed. All I try to do is recognize what is happening, and to make the time it takes to notice a change be as short as possible.

It is not surprising that the strategy you backtested only had a limited, although recent, period of success. I think this is very common.

Everyone is different, and I don't have a "method" to espouse, and I know this may not be a very satisfactory answer to your question. I am a "trend follower," which makes me vulnerable to shorter moves that just reverse and aren't parts of trends, but I'll do well in trends. There are range traders, essentially the opposite, who expect all moves to be short and to reverse, and who grab a chunk of it while they can, or who will trade on a range boundary, expecting price to reverse there. They will do well until a trend comes along and just moves along without them (or worse, they may hold against it, a disaster in the making.) This is sometimes thought to be a scalper's method, but I think of myself as a scalper in terms of the duration of the trades I take (5-10 minutes is long for me, an hour is huge.) So the categories we use to talk about trading can be a little misleading.

I think the reality is that markets have trending and non-trending periods, in fact during the same day or the same hour, and it will take different strategies to take advantage of them. For me, since I am not going to try to trade every single situation the market gets into, this means waiting a lot sometimes.

I think recognizing the context of the market is the most important thing. For me, that includes being willing to wait out the narrower ranging periods, until price does enough to convince you that it is starting to move, and riding it for as long as you can. But what does it take to "convince" one? That's where I'm afraid the art comes in, and not the science. I don't have a special indicator/thing/system/ouija-board for that. In my post above, I may have come across as implying that you just have to take your lumps during the ranges, but I was trying to be funny, and to recognize that ranges are my weakness. Just accepting those losses and hoping to pay them off with a good trend when you get one is usually not a good idea. I think recognizing the character of the market, even in the very short term, is always the important thing. How to do it is another matter.

This post is going on far too long for this thread, and I don't have a good answer, simply because I see your question as the essential one of trading, and not something that has a one-size-fits-all answer, either.

If you would like something more structured and if rigor is something you would like to try, I suggest looking at Kevin's work ( @kevinkdog ). Go to Amazon and search for Kevin Davey, and invest in his larger algorithmic trading book. Not an approach for everyone, but he is solid in his understanding of trading, even if someone isn't into algorithmic trading (and I am not). He is not an intra-day trader either as a rule, but he does know markets and trading. I think that how you look at trading and at markets matters more than what you do, but that's just me, perhaps.

I basically try to read all the trading journals here. Of the ones who improve and succeed, none of them use the same "method" as any of the others who also improve and succeed (even if they call it the same method, such as "price action"). But there are successes. I don't think any of them could sit down and write a book that would actually tell someone else how to do it, however. There's too much individualization.

As always, good luck. If it were easy, everyone could do it.... and then, the market would change because of everyone's actions, and it wouldn't be easy any more. That's why methods/strategies/tactics need flexibility.

Bob.

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