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Trading the 6E Old School, With a Twist
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Trading the 6E Old School, With a Twist

  #91 (permalink)
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Target

@Cashish,

I'm trading only 1 contract on SIM. My thinking at the time of the trade:

Short term...LLs and LHs

I thought we could test the VAL at 1.2476 which was near the HV node and just under SD -1.

I used a 10 pip stop and a target of 16. Don't know if that was right or wrong. My first thought was to go for 10 pips or 1:1 reward/risk.

emini

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eminitrdr View Post
@Cashish,

I'm trading only 1 contract on SIM. My thinking at the time of the trade:

Short term...LLs and LHs

I thought we could test the VAL at 1.2476 which was near the HV node and just under SD -1.

I used a 10 pip stop and a target of 16. Don't know if that was right or wrong. My first thought was to go for 10 pips or 1:1 reward/risk.

emini


I don't believe there is a right or wrong just individual beliefs and individual perspectives.

Seems like good analysis to me.
How does it feel to join an elite group of traders (maybe a few hundred in the world) to initiate trading that close to the LOD.
Might feel a little scary at first, but this too shall pass.

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  #93 (permalink)
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Cashish View Post
I don't believe there is a right or wrong just individual beliefs and individual perspectives.

Seems like good analysis to me.
How does it feel to join an elite group of traders (maybe a few hundred in the world) to initiate trading that close to the LOD.
Might feel a little scary at first, but this too shall pass.

@Cashish,

Not there yet, much to learn.

A few may wonder if emini was run over this morning at the BUY number. Based on the few charts I monitor, I saw the strong selling and just sat here and observed. I know I still have a lot to learn.

emini

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  #94 (permalink)
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There's no School like the Old School





"I find it very, very easy to be true
I find myself alone when each day is through
Yes, I'll admit that I'm a fool for you
Because you're mine, I walk the line"

If trading wasn't entwined with a bit of fun, I wouldn't do it. My life has been extremely chaotic lately and my sleep schedule had to be modified to meet my other obligations. My trading has always taken a backseat to my other business and family responsibilities when "push comes to shove." Last month, after almost two years of legal wrangling I finally achieved closure on three litigation headaches that have haunted almost all of my free time. The outcome was favorable for my family and myself and the emotional relief is most welcome.

I was late to the party this morning and caught a piece of this nice intaday uptrend in the 6E. With NFP and ISM numbers coming out today, I was looking for a partial retrace of yesterday's move, and got it. I targeted the Pivot at 1.2244 and thought since it (the pivot) was so close to 50 (1.2250) I'd go flat there given the opportunity. It worked out very satisfactorily.

This first chart shows price walking the +2SD Band that began calculating at the Globex open. I'm a buyer down to the +1SD Band and I'm prepared to dump the trade for a loss if price falls to the VWAP.

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This chart shows price walking the VWAP that began calculating at 2am est (Frankfurt Open). Using the prior chart in conjunction with this one, I'm a buyer of this trend down to the VWAP, and I'm prepared to dump the trade for a loss if price falls to the -1SD Band. Note: At the 4:40 bar the value of the VWAP on the Globex chart is 1.2202 and the value of the -1SD Band on the 2am chart is also 1.2202, so am I dumping the trade on the line,,,, or on the price? It's kinda like, "the chicken or the egg."

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These two charts show price "walking the bands" after my entry and triggering my targets. If you have followed my posts you know my trading session (is suppose to) end at 6am est. I'll be the first to admit this trend is still intact and my exit could be considered premature. But if I put a trade on, or series of trades between 2 and 6am est and snatch a thousand dollars out of the market, I most generally call it a day.

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There's no School like the Old School

I Walk the Line, Part Two

Here's a method I often use to enter trades after a major news event. It works just as well without news driven volatility but since we had a NFP release today I thought I'd post a few comments. When it comes to news I do not form an opinion on the direction I believe the market should move when the numbers come out. I believe computerized trading has taken most all logical thought out of the market, and any attempt I make to "guess" which direction the market will move on a good report number or bad report number is vain. However I do want to know when the number is to be release for two reasons, 1) to close out any open positions I might have, and 2) prepare for the next trade no matter which direction the market may choose to move, up or down. I find taking signals off the Bollinger Bands is a great way to identify and "get on-board" nice moves. In this example my focus will be on the B Bands. However other factors are always considered when entering trades, these other factors include the VWAP and it's standard deviation levels as well as the Volume Histogram, and the days Pivot, Buy and Sell Numbers. These other studies can and often do offer great entry points when used in conjunction with the B Bands signals, but to simplify this post I may only briefly mention them.

Today, prior to the release of the NFP number the market had retraced +/-50 points off the session's high. For 20 minutes before the release prices consolidated in a ten point range, during which time the POC of the Volume Profile shifted up +/-30 points placing it (POC) above the VWAP. On the chart below during the 20 minutes prior to the news release the B Bands where expanding, however the consolidation of prices inside the B Bands is of important note. When the "good" number came out (along with a revision lower) prices jumped 30 points in both directions, settled in and appeared to find support on the POC and began to make higher highs. The last bar on this 5m chart signaled an opportunity to take a long position. The green dot under the last bar indicates the 20 period SMA of the B Band study shifted from falling to rising, the light green field between the bands indicates volatility is increasing. Lastly, I consider the close of this bar at 1.2284 which is above the upper B Band also a significant indication. As many of you know "walking the bands" is a mainstay of the B Band study.


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On this chart I marked the "signal bar." This is where commitment to this entry method becomes paramount and any hesitation to act on the signal often means missing the entry entirely and chasing the trade. While the signal bar is forming all the parameters to signal a long entry are visible. During the final formation of the bar I snap a Fibonacci tool on the bar (or calculate it in my head) and target the 50% level as my entry level (levels in black on chart). Since this bar had only a 15 point range and three of those ticks were making new highs on increasing volume hitting the offer, I want my entry orders in the market before the close of the bar. I've found if I do get filled at or below the .618 level the trade often fails. With that in mind, the stop on this trade is the low of the signal bar minus 1 tick, in this case very tight, so going "all in" on this entry was indeed an option. So let's assume I'm filled long on this trade, where, when, how do I exit, what's my profit target?


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Of course taking a quick 20 points profit at even (1.2300) would have been a nice trade. Or a trader might consider letting the B Band indicator that got him into this trade work it's "magic" and get him out of the trade. This market is in an up trend the NFP number shook things up a bit but the trend is still intact and this market is still "walking the line." On this chart I removed the fill color from the B Band study and added the VWAP. As long as the B Bands continue to expand that is a signal to stay in this trend. The "gray area" is when the lower B Band turns up (turns red). This is an indication the trend is running out of momentum and could signify a reversal. But there is another quirk to B Bands, the lower band may turn up in a up trend and a strong sustained trend can continue on. Also, I've written before on this thread that after the lower band turns up (in an up trend) it's very common for price to make one more attempt at the most resent high. Any trader worth his salt is going to notice that after the entry and then the high at 1.2312 the market sold off 26 points! True, but consider these factors, 1) the B Bands continued to expand, indicating a continuation of the trend, 2) Price just traded through a whole number, where price rotation is expected, 3) Price has just begun trading above the +2 SD level of the VWAP and is testing it for support for the "gazillionth time" time during this session. My target on this trade was the Trend Reaction Sell Number at 1.2348, when the lower B Band turned up,,,, and price continued to "Walk the Line" of the +2SD I waited with expectations of a retest of the most resent high at 1.2338. Price tested that level, made a new high, and traded above the Sell Number at 1.2348.


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And it just kept going, Walking the Line.


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Last edited by Cashish; August 4th, 2012 at 10:12 AM.
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  #96 (permalink)
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There's no School like the Old School

I Got the Sucker



Don't Try This at Home

This morning after I posted my day's trade results on the https://futures.io/forex-currency-trading/13614-eurusd-6e-euro-eur-usd-futures-contract-euro-170.html#post248183 thread, While I was cleaning up my work space and ready to call it a day, NinjaTrader said, "Order Filled." What? What the hell! Order Filled? I had left some naked orders in the market and they triggered. First, I was filled long (1) an entry buy order that never triggered earlier in the session. By the time I figured out what was going on and what I wanted to do another order triggered. This was a pair of sell stops I had to protect part of my previous position and the (1) buy order that didn't fill. So I lost 3 ticks on the long and I was short 1 contract. I planned on calling it a day when I posted on the other thread but now I thought maybe I'll give this short a little time and attention before I close it out.

I believe the Nemesis of my discretionary trading is my discretion, some times there seems to be a short circuit between the left side of my brain and the right side. If I catch myself during the compulsion to act on emotion I often just check my predefined stops and targets and get up and walk away. Do you remember the scene in the movie, "Back to the Future," where Dr. Brown sits in his study and has conversations with himself and pictures of inventors he admires, "Tom Edison" comes to mind. I do that! But I won't tell you Who I converse with.

"Back to the Trade," All morning I scalped longs in chop and thought this market wanted to drop, but to where? This first chart shows Volume Profiles since last Friday (a portion of Friday). The hash lines in white mark Sun/Monday's low at 1.2347 and Friday's Upper Value Area at 1.2333. Since this trade was a one lot I thought I'd play with it and target this area. Price fell hard, hit 1.2350 and pulled back deep.


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This chart is a stripped down Bollinger Band chart that shows a sell signal on the bar just prior to my "Screw-Up Fills." Since this was a working active signal I incorporated that information into my analysis. I've posted before that I use the high of the signal bar + 1 tick for my stop when taking this signal. So now I have a stop (1.2380) a target (1.2347/33) and a "screwed-up" short entry at (1.2367). On any given day I like taking profits going to even numbers not going through even numbers, but there are exceptions.


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Back to the B Bands, this chart shows price touching 1.2350 and bouncing off. When price hits a whole number I expect price rotation around that number, 14/16 points above and 14/16 points below. The other signal I use with B Bands is the "retest" of the previous level (low 1.2350)) after the upper band (in this down move) turns down (red). To exit trades using B Bands if my target is not filled, I either A) take profit on the "retest" (if it appears) or B) Close out the trade if I get a buy/sell signal in the other direction or C) the stop is triggered. After price hit 50 the market moved up and exceeded my anticipated 16 point rotation by 9 ticks. Now I'm putting all my eggs in one basket and anticipate a retest of the prior low at 1.2350. I add one contract short at 1.2370 and keep the stop at 1.2380 in place. The bar in the circle on the right edge of this chart is a buy signal, but this is were discretion comes in. As I've written previously, if the fill on the entry is at or below the .618 level the trade has a higher probability of failure. But hey, let's get real, this bar has a range of 3 ticks! And it's below the most resent high at 1.2375. More on this in the next chart.


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More Discretion: I'm trying to salvage this trade from a screw up. My risk is in place and my target is under the resent low. Letting 20 ticks on the 6E ($250.00) disappear to thin air is not something I like to do but the entry on this trade was about 10 ticks below the signal bars entry, and it was a one lot, and I think there's more down side in this move, and I believe by looking at this chart of the VP and VWAP the trade location is sound. This chart was the reason for entering the second contract. Selling the second contract on the -1SD level while retaining the original risk (maybe a little less) put this trade "back in the game."

8812g
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3 bars later the B Bands signal another short, under the -2SD level at 1.2360. Hope is rekindled.


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This time, on the retest of 1.2350 price sliced through like butter, down to 37 up to 45 then to that +/- 14/16 price rotation level and a bit more, triggering the targets.

I Got the Sucker


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Writing these posts, is hard. Trying to put into words all the thoughts that race through my head on any given trade could take up a chapter in a book. Thank God this was a one lot. I made a few good scalps earlier so I had a good feel for where the trade was in the market. The big pull back after touching 1.2350 wasn't as demoralizing as it appears when placed in the context on the VP and VWAP chart. Another factor was the time of the drop. I posted yesterday I don't like being in trades at 8:20 am est when the "new crew" of traders come into the market, but sometimes they jump on board and drive the move, that's what I bet on this morning. Like I said, a lot of thoughts.

Thank You Everyone, for reading the thread.

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There's no School like the Old School

Being Wrong: Adventures in the Margin of Error

During the last couple of trading days I've found myself in a couple of trades that got me thinking about being "Right or Wrong." Friday I was behind in a trade for 2-3 hours that I thought was still a good trade. For perspective, most of my trades last less than an hour. I was right about Friday's trade, 5 hours later I took profits. Five hours is a long time for me to sit on a trade, I kept asking myself, am I right about holding this trade, or am I wrong, should I hold it or dump it? Then I remembered something I learned for this book, being wrong feels like being right, it isn't until you realize you are wrong when the feeling changes.

Amazon.com: Being Wrong: Adventures in the Margin of Error (9780061176043): Kathryn Schulz: Books

I thought I'd pass it on.

She (Kathryn Schulz) also did a TedTalk in 2011, well worth the time to view it

Kathryn Schulz: On being wrong | Video on TED.com

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  #98 (permalink)
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There's no School like the Old School

What am I looking at?

I have a tendency to see only what I want to see, not just when I'm trading and looking at my charts but throughout most aspects of my life. I consider myself a pretty good problem solver. I think things through, I contemplate the pros and cons of several courses of action and make a plan. I base my decision to move forward on the intelligent deliberation of the known facts and proceed to carry out my plan in an orderly manner. But I will admit, if I was unaware of an unknown dimension or possibility in the information previously collected, I'm forced to return to the planning stage and start the process all over again. Trading doesn't offer many second chances, rarely will the market allow me a "do over." I have to base all my trading decisions on the past, the lines, bars and patterns on the left side of my charts. The future lies to the right of my chart, those lines and bars that haven't painted yet, the unknown. When the information of the future is printed on my chart and that information is processed in my brain my outlook of the future direction of the market may change. Sometimes, after the previously unknown data appears I find myself saying, "Of course, why didn't I see that before!" The market is an enigma, it's made up of countless moving parts, a trade that looks good now may look horrible five minutes from now. The only way I've learned to "stay alive" in trading was to learn to manager my risk. When I learnt to manage my risk and honor my stops on all my trades I found myself in a position to take advantage of the elusive "do overs." I not talking about emotionally driven compulsive trades entered immediately after taking a loss, I'm talking about taking the loss on a failed trade as defined by my risk parameters, then give the market time to allow the unknown facts (data) to readjust or confirm my view or perspective of the market. Often the "do over" never comes, often it's in the other direction, the most important part is taking the loss, and giving the market time (waiting) to reveal it's intention.

Here (at risk of being banned by Big Mike) are two photos, what do you see?

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In my mind, the first time I saw them I envisioned the one in white a blonde and the one in black a brunette. I don't know if I was right about that or not, but what was most enlightening was the fact I wasn't looking at what I thought I was looking at at all!

When trading I focus mainly on smaller time frames of 5 and 1 minute charts while the position is on. I manage the trade on the 5m chart and satisfy my curiosity by watching the 1m chart. This focus on smaller time frames often restricts my perception of the markets true intentions. While doing my homework and preparing for the trading session I look at longer term charts and incorporate those patterns into my initial play. But as the session unfolds I often find myself focusing more and more on the shorter term charts. This narrowing and narrowing of my outlook on price movements often causes me to lose focus of the bigger picture. If at the end of the session I view a longer term chart and say to myself, "boy I sure missed that move, why didn't I see that coming?" It's usually because I was only looking at a "small" part of the total picture. Over the years I've developed a habit to view several longer term charts during the trading session on the hour and the half hour. I view charts I have no intention of trading off of or taking signals from, it's just a way to keep myself from slowly acquiring a case of tunnel vision during the trading session. Another quirky thing I do to stir up my outlook is to pull up a chart with no indicators or studies on it, not even price lines, just price bars on a black screen. I compress the bars and enlarge the chart to cover a full screen and then, I get up and walk to the other side of the room to view it, a little twist on a longer view of the market. As a trader I have to decide on a future direction if I want to place a trade, but the point I'm trying to make is, I can change my mind. I can change my mind as more information comes out of the price movements of the session, but I have to remain open to the fact this new price action is being added to every chart in my chart book, not just the one I'm trading. So for me while I look at the longer term charts during the session and trade off the smaller term charts, I continuously ask myself the same question over and over, "Do I really see what I think I see?"









Down












Down Lower









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There's no School like the Old School

"If you can't stand the heat, get out of the kitchen"


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Quote attributed to Harry S. Truman

Meaning, If you cannot handle the pressure, you should not be in a position where you have to deal with it.

I've been taking a little more (than normal) heat on my last few trades and thought I'd post some comments about the one subject everyone enjoys reading about, RISK. I believe most people who are not involved with trading are more fascinated with the risk involved with trading than they are with the profits. I also believe most new traders cannot fully understand the importance of managing risk without suffering a deep drawdown or blowing out an account or two. To me trading is all about managing my risk, I could end this post with the following sentence and many readers of this thread might wish I would, but you're not that lucky.

Only I can control how much money I will lose during any given trading session.

It is that simple, it's up to me to pull the plug on every losing trade I enter, no one else is going to do that for me. Sure, my broker will, if I find myself sticking my head up my ass and saying "F" it! On some level we're all money managers, and the fact is some of us are better or more experienced at it than others. Trading is about money, if a trader has even limited success and begins to grow his/her trading account they also have to grow in their ability to manage larger and larger sums of money. Learning to trade successfully requires a working knowledge of the many less glamorous attributes of trading. I may have written this before, I had a trader come by and we traded together for a few days. He had a decent size trade on and it started to go against him. I watched and waited and soon he was out some serious money (thousands) but he did nothing. Then the market turned and started to come back, he did nothing. The whole adverse move retraced and he actually made a little profit. He said, "I knew it would do that." The fact is, he was lucky, no one knows what the market will do next. I've seen it to many times in my own trading when it never comes back to allow a position to go that far against me. I paid my dues, I've done some pretty stupid stuff while trying to find a method of trading that fit my account size and more importantly my personality. For me learning how to take a loss was the key to managing my risk. I believe the sooner a trader can become comfortable with taking a loss the sooner he/she will realize the necessity and the positive effects of risk management. This is a broad topic but one that IMO must be thoroughly exhausted on an individual basis if traders seek to find any reasonable success in trading.

I believe in loss limits, limits on a per trade or per contract basis and also a daily loss limit. These loss limits can, if used properly allow traders plenty of freedom when placing stops on a per trade basis. Risk management is the one area of my trading where strict solid rules apply, always. There is no wiggle room here, the rules are the rules, I either abide by them or I sit on the sidelines.

On Harry Truman's desk he had the famous sign that read, "The Buck Stops Here." When I put a stop in the market, what I'm saying is, if prices trade here at this price my analysis is flawed and I need to exit my position and reevaluate the market. In other words I'm willing to risk XX amount of dollars to see if my analysis is correct, and not one dollar more. I'm totally comfortable with giving the market "my bucks" at this level and at this level, but when the market trades at this level I admit I'm wrong the market, and, "The Bucks (flying out of my trading account) Stop Here."


Last edited by Cashish; August 25th, 2012 at 04:38 AM.
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Cashish, your attachment did not come through for some reason in the last post. May need to edit and reattach?

Great post by the way, and I really appreciate the value of examining risk. It has been a hard process for me to do this.

One of the things that I have found to be consistently true for me, is the importance of good entry location. People will say that the exit is more important, or the management of the trade, and I do agree that those are important, but for me it is the entry location that allows me to minimize the risk. It doesn't mean that I have to get in at the bottom or top--but what it means is that if I establish a position "in the middle of nowhere" then I am almost certain that my stop will need to be quite large to give the market an opportunity to prove me wrong. So, by trading at the edges, it gives the opportunity for us to be wrong small. A good entry in line with our analysis is made possible by patience and not fearing "missing out." All things I have been working on, and continue to... would love to hear your and anyone else's thoughts on this.

-Josh

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