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The VWAP does not look correct. Also, I can see that you start the VWAP at midnight EST, which is somewhere in the middle of the night session. I still do not understand the reason, as all trades between 6:00 PM EST and midnight are now excluded from the calculation - and well the entire volume of the session should be included. However, as volume is typically low during these 6 hours, the error term gets smaller and smaller during the regular session, when the main volume occurs.
Just to please you, I have set my VWAP to start at midnight EST, and as I can see there are a few considerable differences. I have highlighted the differences on the chart below.
While the VWAP itself on your chart is pretty accurate (1831.17 versus 1831.13), the standard deviation bands are completely off. The reason is that the indicator which you use underestimates volatility due to the way it is calculated:
-> it only uses one data point every 15 minutes
-> it only takes into account the close values and not the highs and lows of the bars
For example, there was a spike at 10:00 AM EST. The wide ranging bar should have a considerable impact on the standard deviation of all trades. However, the bands on your chart barely expand, because the close of that bar is near the VWAP.
The indicator that you use is probably crap. I acknowledge that good traders can get excellent results in despite of such indicators.
For the CL chart there seems to be less of a problem, because the wide ranging bar after the news release at 10:30 AM did not close near the VWAP.
However, if you look in detail, you will find a few missed opportunities, when the 2SD band was touched, but your indicator did not alert you!
The NQ is one of the best instruments to trade... its like the crude oil of the indexes! I love it too, and its cheap (although commission basically doubles when you trade multiple contracts)....
it is not only easy to get sidetracked, spun around, and derailed by the markets, but one can also be misled if the information they are receiving is apocryphal. everyone wants to make money, but with respect to what? everyone one wants to wrestle the gorilla, until the door opens. so, instead of making rational decisions based on heuristics, they make emotional decisions that make them feel safe and comfortable. they develop a compulsive addiction to this stimulus-response loop which reduces them to instant-gratification junkies. they may have a seemingly effective methodology that generates profitable trades, but in the end, they never get ahead because they end giving it all back in the rake and grind. they either choose the markets-they-trade and the strategies-they-use arbitrarily, or once again, make the decision based on comfort. they choose markets that mete out justice quickly, irrespective of liquidity concerns or participatory interest.
naive traders continue to fall prey to the sirens call of the scalp; which encourages its participants to take small profits, and teaches them to maximize of the chance of gain, rather than to maximize the gain. they become consumed with the mindset of the scalp and lose perspective and focus on the the big picture, sacrificing long-term performance for short-term gratification. its very easy to come up with reasons for getting out of trending trades, but trading friction guarantees that one will have to trade more and pay more vig just to keep up and not fall behind. the less you pay in commissions, and bid asked spread, the more money you'll end up with at end of day. if a system or methodology is not scalable and the market traded is not liquid enough to afford scalability, then one is condemned to running in place or even losing ground. real opportunity comes from capturing the real move.
rational traders incorporate risk into the determination of their expectation. because their approach is reason-based rather than driven by emotion, they are able to build positions, add to their positions, and follow the trend-to-the-end. they focus on getting bigger, and size their trades to get the maximum compounded growth of their capital relative to the amount of risk they are willing to incur, and they trade the markets and use the strategies that allows them to accomplish these goals. it's why i trade es, zb and gc. they realize and accept that markets vary from day-to-day and even intra-day, and that it is unwise to trade the market the same way, on days that aren't alike.
people continue to take the markets for granted. they believe they will be there forever, or at the very least will be tradeable forever; but nothing is forever. as an ex-floor trader i can lay testament to that reality; so can sears and j.c. penney! if you're just here "to make a better return on your money," or make a living” you may want to give your raison d’etre more consideration. What are you willing to accept as risk, how will you contain that risk. What's the time horizon? You can’t continue to delude yourself - long-run expectations are inextricably divergent from the reality of finite time. What are you doing here and when do you need to get it done by? And are you willing to do, whatever it takes to get it done? without a goal, without a specific, well-articulated criteria, you cannot craft the plan to execute — you are just waffling about in an aimless but comfortable stupor.
forums can be beneficial and i would certainly argue that more education is preferable to less, in any field, provided the education doesn't impede someone's ability to reason things through for themselves and provided the knowledge that is imparted is accurate and doesn’t mislead it’s recipients - to effectively convey ideas to others, we must amend their perspective and their point of reference, so that they may see it anew, and from an entry point that they will understand. To spare them the inevitable beatings of otherwise learning it the hard way is not often appreciated until its too late.
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Well-thought out post. Frankly though, I don't think traders are non-emotional enough in trading. This ain't no job; it is PURE risk on/risk off. I don't see 9 to 5'ers (well paid or not) making the transition EVER to short-term and/or swingtrading.
Less than 0.5% for daytraders long term (making 100K+) and then less than 3% swingtraders (making yearly income @say 75K+).
Higher I.Q. doesn't equate to success. Nor does 'hours put in = $'s out.' A 'hard-stop for time involved is good. Having a successful career that allows one several years of part-time avocational pursuit (w/o too much risk on) is probably best.
But who follows any specific path? Trading is HIGHLY discretionary and personal. I like that enough new traders enter the arena every year to keep this never-ending game of chess rolling along.
I tell anyone that asks me for daytrading to have a higher reward to risk target (2.5 to 1 or a bit higher) vs higher win% to cut down on slippage and commissions. A true edge is only a true edge @ a certain % or higher of 'hypothetical gains/edge.'
