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The PandaWarrior Chronicles
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The PandaWarrior Chronicles

  #1111 (permalink)
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Oh man, what a great day for practice reading multiple time frames. When I got to the charts, I was long biased from last night. I was wrong about how far the shorts would take it, they went much further than I thought possible in one day. So once they made it to the break up area from a couple of weeks ago, I figured a bounce was in order.

When I got to the charts, the higher time frames were long. No trend following shorts available. So long it was.

However, the lower time frame was decidedly short and the intermediate was getting that way. This is the first time since I've been looking at MTF seriously that I have seen the charts so messed up when I first sit down. Some times they are somewhat out of sync but most of the time, the overnight session has been slow enough to allow some consolidation just before 5:30AM my time which sets up a trend following trade around 5:30-5:45ish. Not today.

Since I had no idea what was going on or how long it would take to get the charts in sync, I instantly felt the motivation to trade leave me. I really didn't want to be here nor did I feel like waiting.

So I moved to my sim mode, totally forgot about anything resembling money management or wise behavior and just started clicking away. Whatever felt like it might be worth something I took. Some were good, most were bad.

Eventually, the charts started to sync back up a bit and I knew it would be long trades the rest of the morning. It was a very whippy day. No sustained momentum. After I got over the stupid stuff, I started trading with my plan, had a loser and a couple of winners. Trades posted are the real ones, not the crazy stupid stuff I did earlier.

I also have been reading about volume a bit. So decided to put a 250V chart with the same set up. Figured I could see both buying and selling volume that way. The volume chart today was very smooth. I might end up liking it. I'll keep it around for a couple of weeks and see how it works vs my lower time frame chart.

I am going to do a debrief on today, see how the out of sync time frames might possibly be traded for real and also finish the Danny Riley webinar I started last night. Two hours without interruption is a long time in my house.

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  #1112 (permalink)
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All three time frames were long this morning. I missed the best move out of consolidation as it happened well before I got up. So reduced to looking at continuation entries. To do this, I went to my one min chart, look for opportunity and took the trades on an even smaller time frame. Not my preferred method but it worked today. I messed up the first long and ended up taking an unnecessary loss, made up for it on the next one and then when price broke the support level at the top, I took the fade back to support on the ten min chart using the smaller time frame as entry.

Today it worked like its supposed to. Perhaps my mental focus was better so I was able to see the price action better. In the end, I made the money I needed to make in time to be daddy this morning.

On a different note, I watched the Manesh Patel and Danny Riley webinars this week. Both were excellent. Thanks @BigMike for having these guys on. Danny Riley in particular spoke to me about how much more difficult it is to make up losses if you get down early and that it could be really important to find a stopping point once you are nicely in profit early. Taking this to heart as confirmation of what I have been thinking all along.

Another interesting thing. My win rate on black jack is the same as my trading win rate. 42%. In both cases, I am up $8000 since I started keeping track again last Monday. This is confirmation that managing the size of your winners vs losers is the key to staying in the game. In black jack, I quit every time I make or lose $1000. If I win $1000, I increase my bet size for the next $1000 and if I lose I reduce my bet size for the next $1000. So far its been working. If nothing else, its a fun exercise.

I need to figure out what my rules would be for this in trading as so far, I've kept my money risk the same now for months without thinking about how to increase it when the account is growing. Something else to think about.

Time for the weekend....cheers

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  #1113 (permalink)
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PandaWarrior View Post

On a different note, I watched the Manesh Patel and Danny Riley webinars this week. Both were excellent. Thanks @BigMike for having these guys on. Danny Riley in particular spoke to me about how much more difficult it is to make up losses if you get down early and that it could be really important to find a stopping point once you are nicely in profit early. Taking this to heart as confirmation of what I have been thinking all along.

Another interesting thing. My win rate on black jack is the same as my trading win rate. 42%. In both cases, I am up $8000 since I started keeping track again last Monday. This is confirmation that managing the size of your winners vs losers is the key to staying in the game. In black jack, I quit every time I make or lose $1000. If I win $1000, I increase my bet size for the next $1000 and if I lose I reduce my bet size for the next $1000. So far its been working. If nothing else, its a fun exercise.

I need to figure out what my rules would be for this in trading as so far, I've kept my money risk the same now for months without thinking about how to increase it when the account is growing. Something else to think about.

Time for the weekend....cheers


You bring up a interesting thought; Protect profits and manage risk are 2 mainstays of trading so It begs the question: Why don't traders have a win limit for intra day trading?

This could be especially helpful for new and less experienced traders since they run the risk of letting emotions taking over resulting in giving back most or all of their gains.

Even for experienced traders this could be helpful by requiring discipline on the winning and losing side.

Rule would be something like: Win limit would be enforced when trader is flat and total net profits are over the win limit.

Robert

nosce te ipsum

You make your own opportunities in life.
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  #1114 (permalink)
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Silver Dragon View Post
You bring up a interesting thought; Protect profits and manage risk are 2 mainstays of trading so It begs the question: Why don't traders have a win limit for intra day trading?

This could be especially helpful for new and less experienced traders since they run the risk of letting emotions taking over resulting in giving back most or all of their gains.

Even for experienced traders this could be helpful by requiring discipline on the winning and losing side.

Rule would be something like: Win limit would be enforced when trader is flat and total net profits are over the win limit.

Robert

I like a couple of different ideas.

1. I trade to make X% over my trailing daily average. In other words, if my daily average is 100.00 then I would try to make some number over that. Say $400. Once I reach that number, I quit.

2. Have set business hours. Example. I will trade the first three hours of the day no matter what. Use an equity trail stop that gets you out if your equity falls below 30% of your high water mark. If you make $1000, you would stop trading if your equity for the day fell below $700.

3. Trade to a specific number each day and quit. I like this one the least as it puts the idea in your head the market owes you this every day.

Of the three, I like the first one the best so far. Say you want to average X per day over the course of the month, quarter or whatever time frame you measure with. This means you will want to try to make X+(Y) where (Y) is some number greater than your desired daily average every day if you can. If you are winning, press it a bit. If you are losing, dial down the risk until you are winning.

The idea being that if you have net losing days and you only trade to the average, your average will fall short over time. You must trade for a multiple of the amount you wish to average over time.

If you have a daily stop limit, it might be good to use that limit as your minimum daily target thereby producing an initial 1:1 ratio. Assuming you have a daily winning percentage greater than 50%, you should be good. That combined with an initial per trade R:R of at least 1:1, that should be ok. I currently use an RR of greater than 1:1 which allows me to be profitable with a per trade win rate of 42%. However, my daily win rate is around 90%. This means I am losing on 58% of my trades but making money almost every day at a current rate of 1.66 of my daily average goal.

I am quite pleased with this measuring metric and will continue to monitor it as time goes by. I think the key for me is to continue to find ways to eliminate mistakes by half as well as to increase my confidence over time to let winners ride even more than I do now.

Winners larger than losers is the key. Plain and simple.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #1115 (permalink)
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Silver Dragon View Post
You bring up a interesting thought; Protect profits and manage risk are 2 mainstays of trading so It begs the question: Why don't traders have a win limit for intra day trading?

This could be especially helpful for new and less experienced traders since they run the risk of letting emotions taking over resulting in giving back most or all of their gains.

Even for experienced traders this could be helpful by requiring discipline on the winning and losing side.

Rule would be something like: Win limit would be enforced when trader is flat and total net profits are over the win limit.

Robert


PandaWarrior View Post
I like a couple of different ideas.

1. I trade to make X% over my trailing daily average. In other words, if my daily average is 100.00 then I would try to make some number over that. Say $400. Once I reach that number, I quit.

2. Have set business hours. Example. I will trade the first three hours of the day no matter what. Use an equity trail stop that gets you out if your equity falls below 30% of your high water mark. If you make $1000, you would stop trading if your equity for the day fell below $700.

3. Trade to a specific number each day and quit. I like this one the least as it puts the idea in your head the market owes you this every day.

Of the three, I like the first one the best so far. Say you want to average X per day over the course of the month, quarter or whatever time frame you measure with. This means you will want to try to make X+(Y) where (Y) is some number greater than your desired daily average every day if you can. If you are winning, press it a bit. If you are losing, dial down the risk until you are winning.

The idea being that if you have net losing days and you only trade to the average, your average will fall short over time. You must trade for a multiple of the amount you wish to average over time.

If you have a daily stop limit, it might be good to use that limit as your minimum daily target thereby producing an initial 1:1 ratio. Assuming you have a daily winning percentage greater than 50%, you should be good. That combined with an initial per trade R:R of at least 1:1, that should be ok. I currently use an RR of greater than 1:1 which allows me to be profitable with a per trade win rate of 42%. However, my daily win rate is around 90%. This means I am losing on 58% of my trades but making money almost every day at a current rate of 1.66 of my daily average goal.

I am quite pleased with this measuring metric and will continue to monitor it as time goes by. I think the key for me is to continue to find ways to eliminate mistakes by half as well as to increase my confidence over time to let winners ride even more than I do now.

Winners larger than losers is the key. Plain and simple.

Here's the problem with the above lines of thought: you're trading your money and not the market, where the overriding concern is to minimize regret, and not maximize profits. If you are trading well and the market is not choppy then take advantage of this seemingly rare occurrence, when its not -walk away. But, let the quality of the market be the determinant of when to trade, and not your P&L.

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  #1116 (permalink)
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tigertrader View Post
Here's the problem with the above lines of thought: you're trading your money and not the market, where the overriding concern is to minimize regret, and not maximize profits. If you are trading well and the market is not choppy then take advantage of this seemingly rare occurrence, when its not -walk away. But, let the quality of the market be the determinant of when to trade, and not your P&L.

I agree. I attempt to do this by increasing targets and potentially adding a bit to my money risk. Especially if I am already up. Lets say I normally risk $100 and I'm up $500. On the next trade, I may risk $200 or even $250 if I think I have a really good trade setting up. If it looks like there is plenty of room for the trade to progress past my normal R:R targets or perhaps a break out with a potential runner, I will move my targets out to those areas where it looks like price might run.

This sets up an issue with me though. Managing the runner. I am getting better at it. I have a set trailing method. Basically I trail the swings but only after a new low or high has been made. Once price gets close to my targets, I start trailing one or two bars back depending on how big those bars are.

In this way, I try to maximize the profit potential of trending days. At this point, trading becomes an art form and one which will take many years to perfect. However, I feel like I have at least crossed the hurdle where I know its an art form vs something purely mechanical. There is a lot to be said for feel and that only develops with time.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #1117 (permalink)
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PandaWarrior View Post
I agree. I attempt to do this by increasing targets and potentially adding a bit to my money risk. Especially if I am already up. Lets say I normally risk $100 and I'm up $500. On the next trade, I may risk $200 or even $250 if I think I have a really good trade setting up. If it looks like there is plenty of room for the trade to progress past my normal R:R targets or perhaps a break out with a potential runner, I will move my targets out to those areas where it looks like price might run.

This sets up an issue with me though. Managing the runner. I am getting better at it. I have a set trailing method. Basically I trail the swings but only after a new low or high has been made. Once price gets close to my targets, I start trailing one or two bars back depending on how big those bars are.

In this way, I try to maximize the profit potential of trending days. At this point, trading becomes an art form and one which will take many years to perfect. However, I feel like I have at least crossed the hurdle where I know its an art form vs something purely mechanical. There is a lot to be said for feel and that only develops with time.

You're still missing the point Brian, this isn't Vegas...you're still trading your P&L and not the market. Each trade is an independent event that has absolutely nothing to do with your P&L. Risk/Reward parameters should not be determined by how much money you are up or down, but by the context of the market and the merits of the trade. Its very difficult to do, but your trading decisions should not be based on how good of a day you are having, rather than price action/price level based management of the trade itself. In a way being up on the day may be worse than being down on the day in terms of emotional destabilization. When you are up money, there's a temptation to think you are invulnerable. You start to take on additional risk that may not be warranted, because you "can afford it", or you are playing with the "house's money", instead of what is proper risk/reward for the trade itself. Trading is full of asymmetrical responses like this. When a trade is going against you and you are about to be stopped out, the thought that the market may be simply retracing might lead you to move your stop or even average down, but when you are in a winner and the market retraces, the trader immediately worries that his profit will disappear and stops himself out of the trade instead of adding.


Last edited by tigertrader; September 21st, 2012 at 07:26 PM.
 
  #1118 (permalink)
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tigertrader View Post
When a trade is going against you and you are about to be stopped out, the thought that the market may be simply retracing might lead you to move your stop or even average down, but when you are in a winner and the market retraces, the trader immediately worries that his profit will disappear and stops himself out of the trade instead of adding.

This is very true. I solved the problem with moving stops. I only move them closer to entry. In fact I am beginning to recognize when I am wrong and cut my losses before it even gets close to the stop. This is big step up for me; knowing when I am wrong and acting on it.

The second part about worrying about profits disappearing is still a problem. I have taken a profit on the pullback only to have it go 50 ticks higher after I exit. Even with knowing the past its still hard to overcome. But, it will come just as the stops did however, it is very slow process to retrain your mind to let go of the emotion of losing something you just worked so hard to get.

Robert

nosce te ipsum

You make your own opportunities in life.
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  #1119 (permalink)
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tigertrader View Post
You're still missing the point Brian, this isn't Vegas...you're still trading your P&L and not the market. Each trade is an independent event that has absolutely nothing to do with your P&L. Risk/Reward parameters should not be determined by how much money you are up or down, but by the context of the market and the merits of the trade. Its very difficult to do, but your trading decisions should not be based on how good of a day you are having, rather than price action/price level based management of the trade itself. In a way being up on the day may be worse than being down on the day in terms of emotional destabilization. When you are up money, there's a temptation to think you are invulnerable. You start to take on additional risk that may not be warranted, because you "can afford it", or you are playing with the "house's money", instead of what is proper risk/reward for the trade itself. Trading is full of asymmetrical responses like this. When a trade is going against you and you are about to be stopped out, the thought that the market may be simply retracing might lead you to move your stop or even average down, but when you are in a winner and the market retraces, the trader immediately worries that his profit will disappear and stops himself out of the trade instead of adding.

Some things I think we agree on.

1. Each trade is independent of each other.
2. Each trade should be evaluated on its own merits.
3. In an earlier post, you said when the market is going your way and you are trading well, you should press. (side note, in this post, you said "your trading decisions should not be based on how good of a day you are having). This appears to contradict your earlier statement but I will assume you mean how good of a day you are having in the context of the size of risk you are willing to take vs a "normal" day.
4. There are certain set ups/market conditions that warrant more initial risk.

Some basics about my trading:

1. I have never moved a stop in the hope it will come back. I have moved a stop mid trade if I see a better location for it both looser and tighter. But never in a hope situation.
2. I never average down in a trade. I have averaged up in a trade but its not something I do regularly.
3. I never add size unless my equity is great enough to allow a full stop out and still be above my trailing daily average by at least 1.5%
4. I only add size if I have solid confluence between time frames.
5. My trading goal is to be consistently profitable on a weekly basis. I am over the need to make X number of dollars every day.

Here are my thoughts and questions in regards to your comments.

1. You've been a reader of my thread for a while and your input is valuable as you have time and experience I do not. However, most of your posts are about what I do wrong and while I accept that as an aspect of legitimate coaching, I would like to hear some specific ideas about how a trader should approach being a better trade manager. Nothing about entries because every one has their own method. Its the exit that makes or breaks you and the hardest thing about trading to get a handle on.

2. Crude oil is a wild beast as you know, some days its very directional either long or short for 200-300 ticks and simply entering and holding all day is the best option. Other days, it will run 100 ticks up, then 100 ticks down and then back up again. Other days, it simply grinds out an 80 tick range with no trending direction at all. Still other days you get a 100 tick burst and then sideways the rest of the day.

3. The way I see it, there are a few ways to approach trade management. (this assumes all targets are larger than the stops).
A) All in all out scalping for a few ticks. Say 5-10 ticks per trade
B) All in all out looking to trade legs in a move. Say 15-30 ticks per trade. 2-4 trades per move/trend
C) All in all out, trying to capture a large infrequent move that makes your week with many small stops or BE
D) Scale into #C with small size, wait for the move to happen, add to it on the pull backs. Trail out at a reversal.
E) All in scale out to eliminate risk quickly and let a small runner go. Trail out at a reversal.
F) Variations on all of the above but I think this captures the main ones.

4. In light of characteristics described in #2 with an attempt to provide direction as outlined in #1 and looking at #3 as a starting point of how to manage a trade, would you be willing to give specific positive advise on how a trader should have traded the charts in my posts #11111 and #11112 and what the results would have been with that advised followed exactly? I pick these days because they are recent and provide a reasonable example of crude's price action. Ignore my indicators for the purposes of this illustration.

I ask this because I truly want to learn from someone with a lot more experience than I have and I'm tired of wrestling with this question. I'm at the point mentally that I don't jump into a trade just for the hell of it, nor do I increase size to make up a loss or other stupid stuff like this. What I am after here is solid specific coaching from a professional about the finer points of trading. I recognize that most of trading is being comfortable with ambiguity and uncertainty, but my take away from some of your posts in my thread is that there is no right answer and no matter what a trader does, its wrong.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #1120 (permalink)
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Reprint from A Traders Mindset


The Difference Between Knowledge and Performance

Cognitive knowledge of how to do something is very different than managing performance during challenge. Until the learned knowledge about trading and risk is integrated into the emotions and mindset needed for peak performance in trading, then the learned knowledge is simply not available to the trader during the emotional environment of trading. The learning has not taken place in the emotional context where the performance will be measured. This is because the way you think is emotional-state-dependent.

What does this emotional learning look like to a trader? Traditionally most traders learn how to trade and manage risk while paper trading where there is no risk of loss. People can learn how to trade well and manage risk well in this emotional environment devoid of real risk. They learn the mechanics of trading, how to use their methodology, and get valuable screen time for pattern recognition. And, as they learn how to use these tools they become profitable on paper, but without the context of the downside of the risk of uncertainty.

The problem is that you cannot go to the bank and cash in your paper profits. Yet when the trader takes his or her learned skills into the arena of live trading where capital is at risk, a very different emotional environment takes over - one for which the trader is rarely trained and for which he or she is not prepared. At that moment the skills the trader learned in the emotional environment of a classroom simply are not available to him in the emotional environment that occurs while live trading, where the possibility of capital loss is real and tangible.

These are completely different emotional worlds. And the knowledge gained in the no-risk paper world is not usable until the trader adapts to the new sets of emotional skills and mindset needed for risk management where personal capital is actually being put into play. This is where emotional intelligence is far more important than head-knowledge.

Live trading exposes the fear-based mind that interprets the uncertainty of trading when capital is at risk. Depending on your beliefs about losing, you remain locked into a loserís mind or you learn how to learn from your losses by bringing a powerfully different mindset to the ambiguity of trading.

Teasing Apart Uncertainty and Fear

A highly disciplined mind is the undercurrent that lies beneath emotional management of both methodology and platform. No one becomes successful without emotional discipline. For the vast majority of traders who want to become successful, emotional discipline is built, not found. It is not found out-there in more rules that you will not follow in the heat of trading. It is found by acknowledging your fears and re-training your beliefs so that losing becomes an opportunity to learn and grow from your mistakes Ė instead of trading NOT TO LOSE. In training a mind to trade, the crucial step is that you and the way you perceive (your mind) learn to embrace the uncertainty of probability. It does not come naturally. And your staying in denial about this need keeps you stuck in your self-limiting performances.

Until this happens, your brain is always going to chase certainty because that is what it has evolved to do over countless generations. Your brain is biased to believe that there is an answer that will correctly predict what the markets will do. No matter how much evidence there is to the contrary, your brain and your mind will resist probability thinking. It wants to stay in certainty thinking. This is simply not an effective mindset in trading where the illusion of control is dangerous.

Now add social adaptation to your biological pre-disposition. Most traders grow up in families, schools, and cultures where they learn to not make mistakes, to not lose, and to always be right -- and you have the perfect storm for forging a brain and mind unable to think in probability terms. So the brain and mind that you bring to trading rarely has the capacity to separate uncertainty from fear. And, sure enough, most traders fear uncertainty, which is exactly what they must manage from a probability mindset to be successful traders. If fear is linked to uncertainty, a trader has difficulty moving from paper trading to live trading. And they will continue to have problems until this linkage is disrupted and reformed by new beliefs about uncertainty, losing, and winning.

Learning, Failure, and Trading

What happens when a trade goes against you? (This will tell you a lot about what you learned about how to be successful.) In our culture being successful is associated with not making mistakes. Success is about winning...being a winner. Yet successful trading involves relearning how to lose. Because you are going to make mistakes and you are going to lose. It is the frequency of winning and losing (and the size of the winners compared to the losers) that counts. Learning from mistakes is the key to becoming a successful trader Ė it is what separates successful traders from inconsistent traders. The perception and beliefs you have about winning and losing will be put to the test in trading.

When you lose, do you trigger to self interpretations of inadequacy, powerlessness, and unworthiness? This will expose your faulty beliefs that link your performance with self-limiting beliefs. The fact is that the brain (and you) learn only from failure, not success. Success actually locks you into a comfort zone that keeps you from growing. People get locked into once-successful strategies and refuse to change when the strategies no longer work. Thatís success for you. When you lose, you have high motivation to change. This is key. When you develop a mindset that stops attempting to avoid mistakes but, rather, becomes curious about learning from the mistake Ė you are on the road to probability thinking.

Learning to trade successfully is not about being smart. It is about putting probabilities in your favor and having the emotional stamina to stay in probability thinking, rather than chasing certainty as the Holy Grail. This is the mind that you need to bring to trading. You manage your risk and then move on. Loss is not a statement about the worth of your being. Loss is only about your performance in risk management. Mistakes happen, learning happens, and another trade (with greater skill) becomes possible.

Itís not really about whether you like risk or not. It is about becoming comfortable with risk. This is where uncertainty, and its management, is separated from fear. And it is where the journey of a trader moves from the need for certainty to the management of the ambiguity of the uncertainty of trading in the markets. What mindset do you bring to uncertainty, ambiguity, and losing in trading? The effectiveness of the beliefs behind that mindset will be found in the balance of your trading account
Rande Howell

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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