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Catching Big Waves - a trader's journal of surfing the the markets
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Catching Big Waves - a trader's journal of surfing the the markets

  #731 (permalink)
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Edit 11:15PM EST

It is obvious to me that gold wants to go up. Maybe it won't, but that is what stop losses take care of.

What is frustrating is that for me to trade it the way I would like to, I need a larger account. I truly believe that the best results I could achieve in win/loss ratio and in equity curve would be from trading the major waves, but the leverage of futures contracts makes it nearly impossible for me to trade the waves of the greater size while still maintaining reasonable drawdown possibilities. And having blown up more than one account, playing defense has become my number one priority.


So I have created my version of a hybrid of what I want to do and what I can do, and that is riding small sections of larger waves.

I am not sure if it really matters whether I ride a complete wave from start to finish, and absorb all of the inherent volatilty that goes with that move, or if I continue to do what I have learned works and chunk out pieces for myself along the way. But I would like to ride a major move at least once in my trading career, and that is becoming a stronger and stronger force in my subconscious.


I read story as a teenager, I can't remember the author now or the name of the book, but there was this fictional group of living beings called "clingers". They lived in the bottom of a river that had a constant strong current. They survived by holding on to whatever they had to, thus their name. One clinger decided one day he was tired of clinging. and told his friends and family he was going to let go.

Of course, being clingers, they all advised that was crazy, and so he hung on. But, eventually he had to follow his own path and one day, he just let go.


The current was swift, and ripped him from the river bottom, sent him spinning and twisting. He could not tell where he was, what was up or what was down, it was cold, scary, turbulent. He quickly lost sight of everything he knew and was immersed in nothing but unknown.


Days passed, and the clinger was still alive, flowing swiftly where the current decided to take him, but began to relax in his new environment. As the stress melted away he started to feel good about his decision. He was free and the fear was dissapating, or maybe not even there anymore. "This is great", he thought, and he eventually felt completely at ease going where the current went.


Down river, there was another colony of clingers. One of them happened to spot something headed their way in the current. As the clinger watched intensely, it started to become apparent that what he spotted was possibly another clinger? No, clingers don't do that.

News spread quickly, and the entire colony gathered to watch what they viewed as the coming messiah. They dropped to their knees and praised him as he passed overhead.


The freed being, now one with the current, floated gracefully over this spectacle, then disappeared down stream.


He thought to himself, "all I did was let go".





In my pursuit of trading to the best of my ability, I believe I need to let go. But I am having a hard time matching that with my equity.



Stay safe, trade smart.


Last edited by GaryD; November 30th, 2011 at 01:14 AM. Reason: typos and more typos
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  #732 (permalink)
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This is after my exit at 1724

 
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  #734 (permalink)
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I know. That is the hard part for me to make the transition to truly swing trading. The stop loss I feel this trade warranted is around 1660. But, that was if my entry had been at the breakout of the symmetrical triangle.

When I hesitated to enter the swing at that breakout, because it happened on a Sunday night, it negatively affected the ratio of reward to risk for the whole swing. Even though, in relation to the expected target for wave 5, the stop loss is still a small fraction of the potential gain, the psychological side of having a 500 tick stop loss for a possible 1500 tick gain is difficult for me to relax with. I may have to sit for days or weeks, and then get stopped out.

For me, it seems easier on my physical system to have the more immediate gratification of a 30 tick stop out or a 60 tick profit. I sleep at night.

But, after the move has had a few days to go in my anticipated direction I feel like I let myself down on the trade. I noted in this thread on Sunday something like, if I was trying to pick the bottom, it did not get any better than what we had before us on the charts at that moment, but then talked myself out of it until the next morning. That cost about 200 ticks overnight. same thing yesterday; I wanted to be flat after holding for nust a few hours, but today's price would have yielded another 250 ticks per contract if I would hold overnight.

There are many levels of progress I feel a trader must go through, and I have worked my way to a level of capability that does not match my level of confidence. I can analyze effectively, and at one time only desired that. I can trade profitably, and at one time only asked for that.

Now I am asking for 10 to 1 reward to risk, and that is as difficult on my mind as the other two combined. It is not something I think is fantasy, I know for a fact that ratio is a potential reality. I see over and over that it exists just as the trades I have grown comfortable with exist. The market is doing exactly as it should, but I am not.

I think it is tougher on me now as I have years of study and practice on trading in a certain style, and so I have found a groove that feels good, and a part of me if fighting to stay in that little niche I have carved out for myself. I fought very hard for it. I payed dearly for it. And as I continue to try to push myself to move on, I defend it.


Traders seem to feel more comfortable in general with smaller timeframes, believeing that is how they limit their risk. But in actuality, that is where they increase their risk. I am determined to break free of that backwards thinking.

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The Left Shouder Pivot is a bit of a wild card

 
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This would not be a good area to enter a long trade, right below defined resistance. The better moves would be ;

1) Wait for a pullback to defined support
2) Wait for the market to break through and test
3) Watch for a third attempt to break and ride the stop burst

 
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3rd attempt shown above on lower timeframe, and global view below on 30 minute



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  #740 (permalink)
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No trades today, I have two major distractions. One is work related, the other is psychological as I am working through my thoughts on reward to risk, and risk to equity.

I have read recommendations of keeping risk limited to 1% of equity, others say 2%, some 3%, some 5%. A single GC contract represents a $175k position at today's price, so swing trading at full equity without leverage is arguably within reasonable risk limits to set a stop at $5,000.00 away from your entry price.

But I also look at leverage in my risk equation. I look at time factor in that equation. I look at risk differently, right or wrong.

I comparerisk per trade to my personal equity limits per contract, and I am comfortable with 1 contract, of the range of volatility of a GC contract, per $10,000.00 equity traded, PROVIDED, that I can find a good area to place a stop that is inside a $500.00 threshold. Regardless off how much may be in a trading account. It could be $10,000.00 or $1 million, the per contract risk threshold for me is $500.00 per contract. It does not make sense on a glabal view, but has become something I honor on a personal level. The number has to do with my normal expected profit target. $500.00 is a number I have faith in.

That belief developed from personal experience and training. I was wrong to state a swing trade required more equity, as that still defies my rules. Swing trading requires less leverage, or a different set of rules, or a different instrument, like YG, or even GLD.

Too much can go wrong in electronic trading. I have had data outages that lost money, computer freezes that lost money, broker feed issues that lost money, power line outages that lost money, unexpected distractions that lost money (phone calls, dog needs out, restroom break, coffee break). I have conditioned myself to be nimble and precise, and am wrestling with that.

So, not one attempt today, did not really even try to find one. I would have previously looked for a short entry at the LSP, and would have made some money, in hindsight. But I am working on myself to only go with the major waves and not the medium or short versions, so I miss a lot of previously perfect setups, only to find myself not wanting to take the larger stop loss when the trade I am training for sets up.

It leads to frustration when you are debating yourself, which leads to trading losses. "Revenge" trading does not have to mean trying to recoup losses, it can also mean being at odds with yourself.

I am working on blending my current skill set with my ongoing growth objectives and should resume trading soon. But there are times when the best thing a trader can do is not trade.

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