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I started to look at the histogram on my DOM today. Also, had a lengthy conversation with one of the futures.io (formerly BMT) members and I'm now looking at other things to give me a "big picture" view of the market, as I try to form hypotheses into what drives market action.
The messages, discussions, and feedback I've received has been valuable and is much appreciated! I started this month looking for ways to recognize more trade setups, and right now I have a number of things to research. It's going to take me some time to read and absorb the material, but I'm sure it will help tremendously.
I must constantly ask myself: Am I trading well? Am I following my rules?
In my current quest to find more than 2 trading opportunities per week, I'm continuing to look at a volume histogram as well as bollinger bands. I like looking for and trading within channels, while also waiting for a channel break to signify a possible trend reversal. Today's action showed a broken channel, however, the price action didn't break downward immediately. On the 5-min chart, it seemed a new, lower channel formed in the same direction (bullish) as the first.
Overall, I might have overtraded a little bit, but I felt comfortable the whole way through. Most entries were for two lots. I've been tending to pick a stop-out point, and enter a limit order for the first lot 7 ticks from that stop, and another limit order 4 ticks from the stop. This gives me some comfort in being able to set my total risk for each trade, although I face the risk of a death-by-a-thousand-cuts type of day.
I must constantly ask myself: Am I trading well? Am I following my rules?
Hey, DC, there are 2 techniques that may be of use to you. The first would be to have a written trading plan, outlining the specifics of your business (what are your operating hours, what market, what will you do if the power goes out in the middle of the trade) and the specifics of your setup. What are the exact conditions necessary to generate an entry into the market, what are the exact conditions necessary to get you out?
One technique that I've seen a bunch of students use with success involves printing out successful trades, or setups that have worked with statistical significance in the past. As human beings, we are prone to "emotional myopia", meaning we deal with what we are looking at NOW and forgetting what has happened in the past with relative success. A simple 1" 3 ring binder filled with the successful setups (20-30 examples) reviewed as part of your pre-flight checklist each morning will go a long way to retraining your mind to SEE what it is you're looking for, which will allow it to ignore what you are not looking for.
Today's chart shows the Bollinger Bands on it. I took entries on three setups, all based on a possible reversion to the mean while inside a wedge/channel. I was hesitant around 5:00am when news was imminent, and decided not to make an entry at all, even if price were to touch the top of the channel.
The addition of mean reversion setups to my trade plan seems like its on the right track to giving me more trading opportunities. My original two setups of volume breakouts and volume-based reversals was giving me few opportunities. The result was an increased stress level, leading to feelings of unproductiveness and general "antsy-ness". Those feelings manifested themselves as overtrading.
If the mean reversion setup can give me 2-3 setups per day, then it might go far in addressing negative feelings, thus significantly reducing the overtrading mistake. So far, the last two days show that it might be extremely beneficial.
I must constantly ask myself: Am I trading well? Am I following my rules?
The last thing I intend to do is tell someone how to trade. But after dialing in your indicators and comments over the last few days I thought I may offer a different point of view of the charts you posted. In doing so, and only after you apply your own due diligence, maybe the "risk of a death-by-a-thousand-cuts" can be reduced significantly.
A HISTORY LESSON
A couple decades ago Asian traders wanted to remain aware of the value of the market they were trading after they left their trading desks for the day prior to the European and US traders moving the markets to new levels. Traders in Tokyo are credited with the first attempts and refinement of the Volume Weighted Average Price study. With this new (at the time) calculation of a markets value during the time when these Asian traders were not in the market, when they did return to their trading desks they now had a benchmark for that market's value. This study is widely used today and its value is considered the mean. End of lesson.
With your help (thank you) I was able to replicate your chart posted on Nov 23.
My thought was, you were using something other than the VWAP as your mean in what you were describing as "reversion to the mean" trades. Of course you can use the mean of whatever Bollinger Band average you chose, and trade to your hearts content. But two of your comments jumped out at me, (1) "I might have overtraded a little bit" & (2) "death-by-a-thousand-cuts." Also, since you mentioned the VH study in your resent posts I wanted to wave a flag of caution if you are tempted to use the POC value as your mean. Taking trades around MOST POCs is usually very risky. Furthermore, to quote Jim Dalton, "It (MP) doesn't tell you to buy or sell or anything else. It is just a way to organize data."
I wanted to remind you of this statement before I continue, "The messages, discussions, and feedback I've received has been valuable and is much appreciated!" If at any time you feel I've discredited or disrespected your thread, just say STOP!
This first chart is my attempt to replicate the lines/values that I BELIEVE, you were using to base your Nov 23 trades on. I removed the VH from the chart but the BROWN line is the POC and its shifts during the 3am to 5am session. We can change the start time of the VH and change the value of the POCs significantly, but based on your comments I'm assuming your using 3am as a start time. Buying and selling the bands and taking profits at the greater of the BB ave or the POC could keep a trader very busy during this 2 hour session. And if a trader makes money all the better, but I'm here to offer a different point of view, nothing more.
This chart shows a vwap which also begins calculating its values at 3am. The fuzzy red line is the ave price, the thin green line is the 1st standard deviation and the fuzzy blue line is the 2nd standard deviation. The vwap is a great indicator of volatility, a quick glance at the spread between the SD lines will reveal the instruments volatility from the time the vwap study began its calculations. Since all but the BB study started calculating at 3am they're all pretty much confined within the expanding/contracting SDs of the BB.
Even if I intend to trade only a few hours or a single trading session each day I believe looking at the bigger picture increases my perception of the market and my understanding of the positions of the "other time frame traders." In this chart I'll begin changing the start times of the indicators. First, the Volume Histogram. When the VH is changed to begin it's calculations at the start of the Globex session you can see the effect the POC has on price action on the first several bars on your chart. And the high of the move after the second penetration of the lower BB. Also note the high of the bar after the 5am news.
On this chart both, the vwap and the VH studies begin their respective calculations at the open of the Globex session. I hope your beginning to see, less but more profitable trades. But more importantly less chances of, "death-by-a-thousand-cuts." Is all this coincidence, that's for you to figure out, I just changed the settings on your indicators.
Sorry about that, I'm not sure what I did wrong while posting the charts but I think they're showing now, that's the reason for the edits.
I've been consistent with a certain approach for years now. I thought it was working, but results didn't seem to show. I thought, "just give it more time, be consistent, it'll work out." Yesterday, I was given a sign that it was actually not working.
The situation was not related to trading. Yesterday, my wife got a call from my 3-year-old son's school, saying that she needed to pick him up immediately. It was a behavior problem. His return to preschool after the long holiday weekend was filled with kicking, biting, and a general disregard for the teachers' instructions. Of course, the teachers asked my wife about our techniques with discipline. We use the same techniques found in several of the parenting books -- timeouts, immediately and consistently, followed by a discussion about the offense, all toward developing the understanding of what was done, and why it was a bad thing.
My wife discussed it over the phone with a developmental specialist. So far, the symptoms don't point toward ADHD, but we were told that whatever we were doing was NOT WORKING. After a getting a series of new tips and methods, we'll be hard at work in undoing our own behavior and implementing the new disciplining technique.
This will be difficult. I know it. And at the same time, it's exciting. There's a certain pressure applied to getting this right. We have a 3-year-old who needs guidance. If we get it right, then we could create a well-adjusted, thoughtful, and curious young man who can then grow up to learn, experiment, teach, and provide value to society.
I can parallel this with my trading. Some of my original posts talked about my trade setups-- volume breakouts and price reversals. The data over several months have now shown that these setups are rare, given my trading timeframe. And they're prone to wide stop-outs. I'll admit that they might not work well for me. And now, with the help of others, I've been shown how a different thought process could improve my trading. Seek out the answer to "why". Why do prices move the way they do? What drives price action? How does the time profile of your instrument behave on certain days or after certain news?
I'll need to adapt, to continue studying, and to solidify methods that work, toss out the ones that don't work. The road to mastery is long, in fact it never ends. I guess I'll keep taking the steps. But isn't it really about the journey, anyway?
I must constantly ask myself: Am I trading well? Am I following my rules?
I think it is excellent you are asking the question. Many never get that far. They are in an endless loop of looking for some sort of external influence that is to blame for their trading. New indicators, new charts, new chart types, new methods for entry, new platforms, new brokers, new instruments....
Rarely does one stop and say, "I am accountable for every trade decision and the result of every trade".
As for determining when a method is wrong, I think unfortunately a lot of people that do get this far will immediately try to remove themselves from the trading. They will say "OK, I am to blame. Clearly I do not follow my own rules. So, lets write an automated strategy instead". Then they go down that long dark road, and probably never return.
I think the answer can be more simple than you think. Do you agree that you can make money on sim, for days, weeks, months on end? If yes, then you could simply use your simulated trades as a measure for your cash trades, to grade them and rate them and ultimately decide where to go next.
While methodology on choosing where to enter a trade is important, it is not 99% important, which is roughly how most traders treat it. All the emphasis, focus, time, energy is spent on where to enter. Very little is spent on where to exit, and almost zero is spent on the psychological differences that occur that cause you to literally change your behavior and ultimately your execution of trades when going from sim to cash.
Think back 100 years and wonder what all the ADHD kids did without the drugs? Were they all serial killers by the time they were 10? hmmm....
All kids are different, some don't like authority (BRAVO!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!)...
All a matter of perspective, patience....
I 'get on' my kids for not minding, but you know what, I believe I am wrong for doing so... Kids assert their authority and from that they gain confidence and indenpendence/interdependence etc.. It all depends on your perspective...
As I type this my kid is busy grabbing all my business cards and throwing them on the ground so I can pick them up again. I need the exercise...
(P.S. I just lost my nephew who was on Ridlin since he was 10...)
First, blue very sorry for your loss. Words are not enough for such a thing.
I do not have kids, but I will admit that I believe too many parents (and doctors) are far, far too quick to write a prescription to solve a problem instead of actually using parenting to solve a problem.
I often think back to how I was raised, how my mom was raised, and how my grandma were raised. Then just take a look at the world during each of those generations, and how things have changed. I am specifically talking about change in the family itself, which of course then spills out as change in the world we live in as those families are raised.
If I did have kids today, I would:
- Place emphasis on spending as much direct time with them as possible
- Place emphasis on limiting television time as much as possible, and not as some sort of punishment tool but instead try to educate the child as to how deceptive most things can be on TV yet they come across as facts
- Place emphasis on the best possible education and tutors that I could find anywhere in the world
Easier said than done, naturally. But I look at parents who let their kids watch hours of TV every day or parents who constantly have baby sitters or constantly use day care or school as a way to "take a break" from their child... and well, it is easy to see why we have such an enormous generational gap between today's children and my grandmother's time. Most of it comes from how families have changed, in my opinion.
Blue-- I'm sorry to hear about your nephew. I could not even imagine how to deal with the loss of a younger family member.
The teachers at my son's school seemed to hint toward ADHD, although they admitted they were not at all qualified to make any diagnoses. I personally feel that attention deficit disorder is used as a catch-all excuse by ma, ny physicians it provides a simple reason for why there might be any behavior issues at all. I believe that there is a wide range of "normal", and although there are cases where medication is justified, it is often used as an easy way out. Kids learn in different ways. They progress at different rates. They blossom with different skill sets. And this is all normal, in my opinion.
I must constantly ask myself: Am I trading well? Am I following my rules?
