The Very first time I went snorkeling was in Guam.
My friend apologized for taking me. With a puzzled look on my face I asked why are you sorry?
He said because your very first trip snorkeling was to one of the top 5 places in the world. Everywhere else will pale in comparison.
Like you, the Wild at Heart book was a paradigm shift for me. I hope that one day we can get together and talk about it.
Another 2 years and I hope to be living in Northern Nevada. I know you live somewhere in AZ.
One of my west coast play grounds are the Sand Dunes. As I recall there are some in Yuma?
For those of you wondering what the heck is this book all about?
To wit: Trend-days appear ~16% of the time. Trend -days like today take place even less. But, it's exactly these days, where the money is made. If one trades these days as if they are range days and doesn't take advantage of these "low-probability" events, then they will never attain significant profitability.
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While I agree with your statement, I have a quick question....devils advocate here: If these days occur ~16% of the time, would it not make sense to trade 100% of the time as though it were a range day, thereby obtaining profits ~84% of the time and allowing the outlier day like today become the "losing" day. As long as you don't trade against the major trend that is....In other words, not rely on outliers to make your money?
On the other hand, if one trades every day expecting a low-probability day to happen, then by default, the trader would be trend trading in a range day 84% of the time. And in theory anyway, losing 84% of the time.....
It appears then, the real question is not whether you trend trade or range trade but the real question is this: Do you have a way to determine the difference between the two ahead of time......the million dollar question if there ever was one. And one I haven't answered yet.
The only way I would think it could work would be to always take profits fast on a portion of the position...say some multiple of risk....1:1 perhaps and always leaving a portion to run.....this would produce small wins in a range day along with some breakevens, and a lot of small losers....this also means for one lot traders, lots of disappointment and frustration.....driving the one lot trader to scalp....looking for smaller profits and fewer disappointments.....desperately trying to protect fragile egos and emotional states......and bleeding greed on a trend day.......and it means that for traders trading more than one lot, but not huge accounts, you have to enter with perhaps more than your desired size in order to have something to take off early....
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
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I prefer range days myself. When I say prefer, I mean I do better with them. And lucky for me, they happen more often.
Usually if there is a strong trend day we end up outside the normal volatility, outside the VP value areas, etc etc, so that is my clue to not try my typical trade setup.
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If I were going to choose one day over the other, I think I would be better off trading trend days only. Yes, that amounts to about 35-36 days a year, but in practice, it would account to more than that, while I manage the trade and until volatility dies down. Otherwise, I should be able to switch gears from one kind of trading day to another. This is in part, one of the most important skills a trader can have. Once again however, I would concentrate on developing my methodology and strategies for trend days first and then range days
range days may be more prevalent, but are also the most difficult to trade and the least profitable days to trade
they also reinforce and reward bad habits; i.e., premature profit taking, poor risk/reward ratios, because of the mean-reverting price action -then when a trend day occurs, you're unprepared to trade it optimally, or ignorant of it implications
Ironically, trend days were made for a purely technically motivated directional trader like yourself.
So, indeed the first step is anticipating the move; watching for patterns in price and volatility at predetermined critical inflection points to assess when traders at the margin might be setting off a series of events that can lead to trends and larger market swings - the low probability events I refer to
step 2 is recognition of the move, hopefully as early in the trading day as possible, e.g., the market opens (especially gaps) above/below value, VWAP, and pivot and is accepted
step 3 alter your strategy to trend mode, contemplate the very real possibility you might be initiating trades that won't be closed until MOC or later
step 4 is levering up - time to up your size, this is a special day that requires special measures
step 5 is adding to your position, decreasing pyramid on strength
step 6 is pressing your position - no reason to get out if this is indeed a trend day
Last edited by tigertrader; June 20th, 2013 at 06:14 PM.
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I agree in principle tt, but if I read you correctly, you're saying that premature profit taking is a bad thing only in the context of a trend day. In other words, on a range day, if I buy low and sell high, and sell high and buy low, then my profit taking is not actually premature, it's simply smaller than it would be if it were not a range day. Ditto for R:R--I think that it's much harder to define risk and reward on a trend day, because some go 10, 15, 30, 40... on a range day, the range is pretty well set, so it can be quite straightforward to buy/sell at the edge of value, where risk is relatively small, and simply close or reverse at the other side. Risk clearly defined (too far outside of value), reward clearly defined (the other side/middle of value).
Also, certainly the absolute returns on a trend day can be enormous when compared to range days, but some people prefer less volatility in their returns. If I rely on 1 out of 10 days for most of my returns, then I am going to be (1) very pissed when I miss one of those, even if I rarely take a day off, and (2) unfortunately, due to my human nature and inexperience, anxious for that day to come, and possibly be creative and imagine a trend day when it is no such thing, because I am looking for that type of day.
Just pointing out that ideally we would all be great trend traders, and still be able to play the ranges like a champ, but the fact is that different personalities, trading methods, and requirements on returns will make that darn near impossible. You are the most interesting trader in the world, so you can play a trend day without mucking up the other 9 out of 10 days; others of us are not so interesting and may have a tougher time!
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@josh: Hey, no one said this was supposed to be easy. Once again this is a big picture idea, i.e., what works most of the time (or at least appears to work) is usually the opposite of what works in the long run. I have compared trading to the American venture cap model before; where a vc invests in a portfolio of companies, but where the bulk of the return is generated by a very small percentage of the portfolio companies. These are the companies that produce " home run" returns.
Personally, I think range days are trade-able, but also very choppy and a consistent source of losses for most traders. PA is certainly more random because the market is in balance. However, on a trend day that balance has shifted, as large scale and long time frame buyers enter the market. IMO, these are the most reliable patterns for technical traders because there is finally a real buying or selling imbalance. In opposition to what you stated, it is often easier to define risk points for these kind of trades; with some of the cleanest, easiest trades coming from initiative trend trades.
Catching trend days are a game changer. If you make a bad trade, you can always take your small loss. But if you miss a trend day or don't take full advantage it, you're putting yourself behind the eight ball. Catch them with any kind of regularity and you will see your year-end skyrocket.
I don’t trade often my friend, but when I do I make sure its a trend day -XX
Last edited by tigertrader; June 21st, 2013 at 08:49 AM.
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