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

  #231 (permalink)
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When using cash vs futes

Would TPO profiles (time price opportunity, ThinkorSwim) work in lieu of volume profile?

-Bill

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  #232 (permalink)
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WilleeMac View Post
When using cash vs futes

Would TPO profiles (time price opportunity, ThinkorSwim) work in lieu of volume profile?

-Bill

@WilleeMac I'm not familiar with the Think or Swim platform but I would assume it would be fine. I've used the time on price method and still do on occasion, honestly I believe it's "coming back." The one option I find most useful is the ability to start a new profile quickly at any given time of day. This allows me to start a profile on different opening times, Asia, European and US. With the 23/24 hour markets the LONG SLOW times just build and build and build profiles off "go nowhere" prices. This obviously creates a POC that "looks" impressive, but when REAL volume hits the market around a session open for example, I find it useful to start a new profile. I'll post two charts, one time/price and volume/price. I'm looking forward to seeing your chart, I hope you stop by again and post some.


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

Building a Better Mouse Trap



I sure would like to spend the afternoon with J. Peter Steidlmayer, maybe Big Mike can lure him in and do a webinar, that would be one I'd clear my calendar for. His recent work, and the few presentations floating around on the web validate a few beliefs I have about the different time frame traders participating in today's market. In every presentation I've heard, someone will ask, "Is Market Profile obsolete?" Peter Steidlmayer responds by suggestion MP is subjective rather than obsolete. He basically says it's up to you to find a method, and make it (MP) work for you. I've been trading with Volume Profiles for several years and what Peter says in these few presentations makes a lot of sense to me. I agree with most of the issues he describes relating to fast one way moves with light and heavy volume. I've pulled my hair out trying to find that "perfect" setting for a volume profile. I've uses profiles that started on 1,3,5,7, 10, 15 and 30 minutes, I've also tried 1, 2, 4 and 6 hour profiles. When I began starting a new profile for each session things began to fall into place. But I wanted more, I wanted to trade the extremes of the value area all day long. But as more and more volume came into the "day" and as the range began to widen the value area often exceeded 50 ticks or more. By incorporating the VWAP on my chart I had another set of targets and my "need for speed" was once again fulfilled. But again, when heavy volume came into the market the VWAP bands would widen far beyond my comfort zone for a target or a stop, 20 to 40 ticks between the bands is not that uncommon, especially after an economic report fuels a major move. I'm a firm believer in daily profit targets, I expect each trade to have a 33.3% chance of being a winner. When I put a trade on I expect the market to go up, down or sideways. Of course I want it to go in my direction but remember, "Shit in one hand and wish in the other, and see which one fills up first!" So when I enter a trade, I enter with enough size to fulfill my daily profit target, if everything "goes as planned" I'm done for the day (or session). So if I only expect a 33.3% chance of success on any trade I need to put the odds on my side. I believe I do this by doing my homework, that's what this post is about. It's no secret that news drives today's markets, markets can consolidate in tight ranges for hours (days) prior to a economic report and within a minute move the entire average range. These fast one way moves are what took me on this journey down the rabbit hole to find a way to read the market AFTER a big move threw most all indicators completely "out of whack."

Friday February 22, 2013

I'm going to focus this post on one move, but if you glean the wheat from the chaff you may, " find a method, and make it (MP) (edit,,, VP) work for you." A few minutes after 6am est reports that LTRO II repayments fell short of expectations by 40 Billion (Euro) and the Euro tumbled 47 ticks in one minute. Forty seven ticks ain't nothing to get excited about but the volume of the move is.

This is a daily chart with an area I've been watching (green lines) during the week. The Mighty Euro dropped on Wed and put in a 164 tick range, it dropped again on Thurs with a 129 tick range, IMO, 1.3148 was dead in it's sights.


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Below are two charts, the first is a Globex chart and the second is a EU Session chart that I began calculating at 2am est. The purpose of posting these will be revealed later, I've removed the VP from them but left the Value Areas, the red line separating the upper from the lower is of course the POC. It's pretty easy to see the POC on both charts was between 1.3215 and 1.3220 at the time of the down move. Furthermore, once prices fell below the -2SD level a trader "like myself" was at a loss for 'targets.' Yea, yea, yea yesterdays low and maybe there's a fib number or extension down there from somewhere up above, but I like trading around the VA and SD levels of the VWAP, given that, after big breaks there's usually never much around. IMO, the most important data on these charts is the spike in the volume graph.


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When this drop started the volume just kept coming, and coming that's what makes this move worthy of study. When big moves with heavy volume come into the market, I believe it is in my best interest to have statistics available so I can analyse what exactly is taking place. More importantly, can my analysis reveal trade-able opportunities I can exploit.


This chart is an expanded volume sub window from a 1m chart, the spike on the left is the 6:04 bar, when that bar closed the volume reading was 10.5k. A 10k 1m bar is not that uncommon the Euro averages 1 a week but the average high volume 1m bar seen each day in the last 20 days is 5,700. FWIW, there's an equal number of these "high volume" bars between 2-8am as there is between 8am to 2pm est. Another notable observation is the next few bars, another 10k contracts traded within the next few minutes.

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My studies (homework) tell me the average volume traded from 2am - 8am for the last 20 days is 93.4k. So when I see more than 10% of the sessions volume trade in 1m I take notice. In this example 23.4% of the sessions volume traded within 5m, another 12% of the 20 day average (total 35.5%) traded before the average bar volume returned to "normal" (286). This chart shows volume "calming down" and getting "back to normal." The bar on the left is not the 6:04 bar it's the 6:21 bar it ONLY had a volume reading of 1345. Do I know these percentages on the fly during trading hours no, I only figured them for this post. But I do know 10.5k is more than 10% of 100k and I do know the session average is less than 100k. I also know any bar with volume greater than 5,700 is a high volume bar in either the EU session or the US session. At the end of each day I open a 6 hour chart, and write down the volume for that bar (session) and calculate an average over 5, 10 and 20 days. Session times are somewhat of a "gray area" these days, IMO. I'm leaning more and more towards, news to news. It aligns well with my beliefs of volume, more than opening and closing "bells."

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So what does all this have to do with anything? I'm looking for an opportunity to trade. When high volume comes into the market I've been having some limited success by starting a volume profile and VWAP on the bar prior to the high volume bar. IMO, after a high volume move up or down the market is inclined to consolidate, If I can identify when the market is "back to normal" I can trade the normal market rotations and maybe prepare myself for the next move away from consolidation. This chart shows a VP (value area only) and VWAP which I started calculating after the high volume move. I believe this chart shows the true state of the market, a lazy consolidation right up to the US open. Another point I want to make is the POC of this chart,,, it's flatlined. Look back at the first two charts I posted and notice the shifts in the POC LOWER to MATCH this chart. Of course the EU chart shifted first (less volume) at 8:40 and then the Globex followed at 9:15. Also notice the width of the VA and the distance between the SD bands of the VWAP. IMO the volume of this move was (is) a force to be reckoned with.


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Hey guys, here are the simulated trades from Friday morning.

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Last edited by Cashish; February 25th, 2013 at 10:48 PM.
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  #234 (permalink)
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There's no School like the Old School

Mr. B Band Bring Me a Dream





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

A Rock and a Hard Place


IMO, this market is in a very peculiar state. Italian elections, Pope (problems) and U.S. legislators doing what they do best, "jerk off." I believe the 6E is being avoided by longer term traders like a hot potato, those that are holding positions longer term are keeping both eyes on their positions.


Here is a COT Chart, Since January Large Specs have been short, long, short, long, short. It's easy to see participation is subdued.


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IMO, the 1.3000 level has become the front line of the unending battle between the Bulls and the Bears.

The CME data shows an increase in Open Interest on puts and calls on the 1.3000 strike price. From Friday to Friday the OI at 1.3000 increased by more than 4,000 contracts. During the week the P/C Ratio at this level was incredible. Friday over 1000 put options were added to OI and they were almost matched by 800 calls.


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IMO, the 1.3000 level will hold for the near term, BUT if the pressure is to great and the level is breached, I think a free fall to 1.2800 (in a blink) is not out of the question. Only time will tell.

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

Statistical Analysis Trading: Throwing a Big Net

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I'm going to throw a Big Net with this post. While doing some homework lately I came across the following chart and thought it was a near perfect example of a few statistics that I personally "lean on" when I trade. There's a lot of scuttlebutt being posted on the forum lately about daily profit targets, harmonic rotations, average daily ranges, MAE, MFE and per trade statistics in general. In this post I'll post My Opinion on these topics and why I've geared my trading to incorporate them.

To be absolutely clear, the only reason I trade is to make money, not for fun, not for excitement, not for ego and never to escape from boredom. In my experience I believe trading is more about how much money I don't lose, not how much I make. The best way I've found to assure myself I won't lose any trading capital is to stay on the sidelines and stay out of the market! I operate from the notion that every time I enter a position the market can do one of three things, it can go up, it can go down or it can go sideways. I don't enter positions with an intention of babysitting a trade in a prolonged consolidating sideways market, I "expect" the market to move in the direction of my analysis relatively quickly and trade to or thru my target. This of course is how it is in the perfect world, in the real trading arena things are much different. The random distribution of winning trades and losing trades is the "fly in the ointment." IF, my best analysis of market direction is at best (always) 50/50, I have to take and make an extra effort to control my risk. To control my risk I personally lower my expectation of the random distribution from 50/50 to 33.3/66.6. Since I don't want to sit on an open position in a sideways market and I sure don't want it to go against me, I have to be comfortable knowing I only have a 33.3% chance of my trade catching the random distribution of my analysis/trade/entry to be proven correct by market action on any single trade. Then, there is the theory of diminishing returns, simply, the more chances I take the less I'll win. When I sit down to my trading station for any given session I'm looking for one trade. When that one trade appears I enter my position with enough size to fulfill my daily profit goal if/when the market moves in the direction of my analysis and triggers my resting orders on my target price. As I said, this is a big net so while I'm "at the target" I want to mention MFE. If my trade is successful and the market trades to and or thru my target obviously the MFE on the trade is always equal to the points of profit on the trade. My profit targets are not some random number I pulled out of my ass, they are the result of many hours of studying my market over the period of years. MFE, is IMO a key statistic for anyone attempting to fine tune an already working trading method/system, if understood properly. MFE is IMO, not a statistic for a newbie. To clarify, if newbie is entering trades at totally random levels in the market with limited understanding of S/R levels or normal price rotation (harmonic rotation) and "wishing" for (N) ticks on every trade he enters and he's looking at his MFE statistic as a "reason" to take profits at (N) ticks instead of (N) ticks on the few trades that actually go in his favorable direction, to put it bluntly, he's wasting his time. I believe inexperienced traders view MFE as a tool to "locate" an optimum exit for their past trades and totally disregard its usefulness in "locating" a much better entry of their past trades. MFE and MAE have limitations, as I've said before in this thread a total understanding of "what the hell" I'm looking at is IMO extremely important for everything I put on my chart and the tools used to analyze my trading progress. IMO, Newbie would be better served if he rolled up his sleeves and studied the location of his orders on a naked chart in relation to the "context" of the prior price action, with the majority of focus on risk. Back to daily profit targets. If I can analyze the market, place an order for entry and achieve my price target I'm done "live trading" for the session, I call it "one and done." Anyone who's traded a live cash account is well aware of the psychological affects even a small draw down can create. I'm no exception, if I lose money, I want it back! I didn't fall out of the back of a turnip truck yesterday, I paid my dues to the market, on occasion I still do. IMO there is nothing more demoralizing than being up (any amount) for the day and watching it evaporate away and turn into a loss at the end of the day. The market is a different beast at 2am than it is at 8am than it is at noon and at 2pm. IMO it takes time to truly understand a market and today's 23 hour markets demand a lot of understanding. I believe it's not the 10,000 hours of screen time that makes winners winners but how winning traders react to adversity, do they walk away when their down (N) dollars and come back tomorrow or do they stay and dance with the devil (diminishing returns) and slide deeper and deeper into the abyss. I believe trading is like sex, I know when I'm done.

The Charts and a Few Stats

This is a chart of the 6E H3 on Feb 8 2013 at 1:55am est.. I was updating some stats today and I cherry picked this chart for this post, to be honest I don't know if I traded on this day or not, I haven't checked. This chart has several examples of the prior discussion. Normal price rotation, for the 6E can best be seen around whole numbers '50s and even ('00s) I generally consider these trade-able opportunities, but common sense always takes precedence. An example might be if Mario Draghi is about to give a press conference in fifteen minutes. When price rotates around a whole number I expect movement of 14/16 ticks above and below the whole number. This chart shows (on the left) rotation below 1.3400,,, the 18:55 bar low is 1.3385,,,, 15 ticks below the whole number. Then a move UP to 1.3420 and price rotated around the 14/16 area for more than 3 hours ,,,, then price returned to 1.3400. Rotated back UP to 1.3415 and at 1:55 (hard right edge) price is sitting on 1.3407. So at this point in time, just prior to the Frankfurt Open I look for several things.

1. 14/16 tick rotation above or below the whole number
2. Rotation between the +1 and-1 SD levels of the VWAP
3. Rotation "down to" or "up to" the 2nd SD level
3a. Prior to the open I take notice of the +2 and -2 SD levels and on this chart I've marked that level

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AT the Open volume shows up and price falls below the -1 SD level. The -2 SD level is 1.3389, I'm a buyer at any price at or below this level, why?,,,,, I'll get to that later. BUT, since the -2 SD level is close to the 14/16 tick rotation I'll TRY to get filled on '86'85 and '84.

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Price falls and rotates within the -1 and -2 SD bands giving plenty of opportunity to BUY below the original -2 SD level and touches '86, and then '84 to the tick. The reason for marking the "original" -2 SD level is that often price will "touch and go" and only give one chance for an entry,,,, but like I said THIS TIME the level was only 5 ticks away from the "normal rotation" of 14/16 ticks. Another entry method I use is to put orders on ALL the prices 89,88,87,86,85 and 84,,,, this of course depends on the amount of contracts you trade,,, or buy the 'odds' (89-87-85) or the 'evens' (88-86-84),,, believe me it works. Where's the stop? as a rule of thumb when rotating around a whole number I use 23 ticks FROM the whole number,,, in this case '77. Where's the target? when rotating around a whole number I use a tick BEFORE the whole number,,,, if the trade is JUST the +2 or-2 SD level I use the VWAP. Mark the time,,,, 2:35am

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Two bars later, at 2:45am price trades thru the target and the trade is closed out. One tick shy of the VWAP.

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This price movement has more opportunities and as I said this chart shows several, that's why I picked it. I've posted this trade several times on this thread, the 2am reversion to mean trade. Buy or sell the +2 or-2 SD level and target the VWAP. I keep a rolling average of this trade based on 20 trading days and I've seen it successful 80% of the time. A 4 tick stop is "enough" 60% of the time. I take this trade a lot because it has a couple more quirks to it. First, the trade is FAST,,,,, MOST of the time it is over before 3am. Secondly, depending on the entry level LIKE THIS TRADE EXAMPLE part or all of the position could be held for a greater move. 65% of the time either the High or the Low of the price range between 2 and 3am will hold until 6am. Since this trade entry was THE LOW and price moved UP near the 2am open (high) at 2:45 it would signal to me THIS LOW ""might"" hold until 6am. Another factor to consider is the daily range. The 20 period average range between 2 and 6am is 64 ticks. At this time (2:45) the range is 22 ticks, there's a lot more potential for simple statistical analysis to reap profits from this market in the next few hours.

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This Chart is Friday March 8 2013 Everyone is anticipating the release of the Non Farm Payroll data. Visions of wild erratic moves keeps many traders snug in their beds on these days. But it is my intention to show that "Normal Rotation" is just that, normal. Do these levels look familiar? I keep rolling averages of several key price movements that I trade, one of them is NFP days. I don't want to get anywhere near the market once a major release is posted but if I come to the market at 2am armed with a few simple statistics I can be (and often am) "one and done" hours before the news hits. Most of my statistics are based on 5,10 and 20 periods but I have one statistic that's based on 12 periods. IMO, most traders believe on a day when a major release is to be announced the market will churn and go nowhere for hours, often it's true, but how true. I keep a 12 period average of the price movement (range) from the Globex open until 8am on NFP day. This range can be as narrow as 25 ticks and as wide as 125 ticks, but the average is 67 ticks. So once again coming into Friday's session "expecting" a daily ave range of 64 ticks and a "NFP Range" of 67 ticks when the '86/'84 level held for a second time (2-3am Low) expansion to the UP side BEFORE 6am wasn't that surprising.

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Where I come from everyone throws a Big Net.

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

Up, Down or Sideways


Rollover, time change and news makes for interesting trading. For those who are just beginning to look at COT data remember, the numbers include the Open Interest on ALL contracts. I'm a visual trader, stripping out charts and looking at things from different points of view has helped me see "the forest from the trees." When I look at COT data all I'm asking of the chart is point me in the right direction, North or South. This chart IMO, is suggesting the "easy path" is South. BUT, I believe the longer price moves sideways the possibility of a short squeeze increases dramatically. Plenty of trading opportunities here that's for sure, but as always and especially now (IMO) keep both eyes on risk. Any breaking news or sound bite from one of the Major Talking Heads could send this market in EITHER direction, and fast. This is only my opinion of course.


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There's no School like the Old School

One and Done A.K.A., Daily Profit Target


I've avoided writing this post for a long time, for many reasons, mainly because I feel it's a very complicated subject with tentacles that entwine around several topics. I touched on this topic in a few posts up-thread but really haven't been satisfied with what I wrote. Since I believe this multidimensional topic could be just as important to struggling traders as well as new traders I found I just couldn't leave it alone. Although this may get ugly, I believe the theories, ideas and beliefs that make up the concept of "One and Done," deserve to be aired out. The Warning; I've had a head cold for the last week or so and the medication may cause me to ramble more than usual.

Risk

All trading systems, either mechanical or discretionary must be evaluated in two interrelated dimensions, profit and risk. This is one of the few facts of trading, furthermore, profit and risk must be evaluated with respect to each other, not individually. The theory is the more accurately the system was evaluated in testing, more consistent real time results should be expected. This is the first concept to put your arms around (there are many). I started this thread with the intention to offer ideas other traders could glean and incorporate into their own creations, creations that fit their personal appetite for risk and their psychology. There are many "mini systems" in these posts, the 2am reversion trade, the B Band trade and the forbidden zone are three. Each of these "ideas" cost me hours of study, when I see them I trust them and I trade them. "Stupid is as stupid does," needs to be expressed, just because I see a B Band signal doesn't mean I jump on the trade! Experience, is something that can't be given away, I am a discretionary trader after all. What about risk? IMO, risk is the answer to all the riddles of trading. That may seem bold but anyone who's traded a live account will probably agree, "it's not how much you make, it's how much you don't lose." IMO, many good traders shoot themselves in the foot by trying to trade "good ideas" (systems) with accounts so small their risk parameters cannot survive the markets "normal" price rotations. This is a snip I found that shows how much percentage of Gain on Balance is required to recover different percentages of losses of Initial Capital. I believe this is the type of information traders should consider when evaluating the risk necessary to trade a system in the live market.


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The Nemesis of every trading system whether it's mechanical or discretionary is the point in the market where the system takes a profit. A fixed or predefined profit target is in reality an aggressive method of profit management, period. When a system finds and signals an entry and a predefined target is used and triggered, profit is taken, and it cannot be given back to the market. The flip side of this is, when the market keeps going the potential to accumulate additional gains is non existent. There's a price to everything. Some systems with profit targets are less profitable but achieve a higher percentage of winning trades than those that don't. Other benefits of systems with predefined targets can be, per trade and total risk can be reduced, also returns can be much more stable over time. The "tradeoffs" should be revealed during testing and at some point, a decision has to be made if the system fits your "trading personality." What I've written thus far is the core of "One and Done," there's no secret formula to any of this just hours and hours of refining, refining, refining.

Backward Testing is Meaningless

I agree and I disagree. I believe ferreting through historical data will set you on the "right path," I believe it will let you know in a hurry whether you're wasting your time or not. I'm going to use a simple 20 period SMA system for an example. You put it on a chart and you see potential, the risk is "OK" the losing run is "OK" the max drawdown is "OK" and you believe you have the necessary capital. But, you're a day trader and NEVER hold positions overnight. You wake up Monday morning and pull up your chart, price is 20 ticks above the average all day and the market just trends off into the sunset,,,, with out you. Now, IF you would have entered the trade when price crossed the 20 period ave during the Asian trading session and went to bed with your predefined stop loss in place you could have awoken already riding the wave and closed the profitable position at the EOD. The point I'm trying to make here is (in the 6E) there are 3 trading sessions within a 23 hour day. Each session trades differently and some systems like this 20 SMA example "should" be traded across all three. Due to other responsibilities some days I can't trade the EU session, some days I can't trade the US session, sometimes when I'm sitting at my trading station doing homework for the next day I'll see what appears to be an opportunity in the Asian session. I trade each session differently, and I expect different results from each session. For instance, the BBand trade may not work as well on the lower volume of the Asian session but a retracement trade or a continuation trade to the Globex close or the VWAP of the prior US session may work time and again. Same is true with the 2am reversion trade, try that in the US session and the results will change dramatically. So IMO, backward testing will put you in the ballpark, common sense and experience will define what inning it is and "who's on first." Forward testing on a simulator is the best thing since sliced bread, IMO. But the point I want to make is, keep your results separated by the session you're trading. Take notice of the percentage of successful trades during each individual session AND each individual system, as time goes on you will begin to know what's NOT important, and hone your efforts on what works when.


Probability of Outcome

Up, down or sideways. Look at a chart at anytime the market is open and I'll grantee you within the next 15 minutes price will either go up, down or sideways. After all the backward testing and all the simulated forward testing this fact will never change. The movements of the market are an enigma they're made up of many unseen unknowable forces. Our best analysis is at the mercy of the trading Gods when we click the mouse to enter positions. There is NO WAY of knowing the outcome of any single trade before the trade is entered. If I have a system that I've traded in the live market 1000 times and that system has a historical winning percentage of 80% I must be prepared to accept the loss on the trade if THIS TIME the random distribution of wins and losses hands me a losing trade. This random distribution between the expected 8 wins and two loses out of every 10 entries levels the playing field on each and every trade. This random distribution forces the expectancy of every entry of every system to 50/50. If you cannot get your head around this fact, it's been nice knowing you and I bid you good day! I'm not going to reinvent the wheel here but I will post this graph I STOLE from you know who,,, oh I guess we DON'T know. The purpose of this graph is to show just what it says, the probability of outcome in a streak. If the probability of the next trade being a successful one is 50/50 and if I in fact take the trade and close it out at my predefined profit target and then I get another signal, what is the probability of that trade being a successful trade? According to this, 25% ,, the third trade,, 12.5%. My intention here is to show the probability of successful trade after successful after successful trade isn't very good. This is a statistic nothing more. I call it "Dancing with the Devil," when I believe I can SOMEHOW out perform these probabilities which are skewed against me. Hence, "One and Done."


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Managing Trades

Let's say I enter a 1 lot long at even, my stop is at '90, my target is '15. The market goes in my direction 8 ticks stops and rotates between 8 and 4. Then it moves up to 9 back down to 4 then 3 ,,,, what "should" I do and what "do" I do is what trade management is all about. My analysis told me the 15 tick profit target was a worthy target, I "should" hold the trade and keep my hands OFF the stop and let the trade work to it's fruition, win or lose. IMO, it is much harder to trade with one contract, you are locked into the trade and have no where to maneuver. All things being equal a one lot trader has to be very patient and very precise with entries and exits. There is a point to this, managing multiple contracts can drastically help limit risk. Multiple contracts can also be use to hone and enhance the profitability of a system. Trading with multiple contracts in tight ranges of 10 to 20 ticks takes focus but taking risk off the table and reentering on pullbacks or stops above the market can be very rewarding when done systematically. I'm trying to highlight different methods for different conditions/markets. It's no secret there are a lot of undercapitalized traders in the markets. Trading a one lot is IMO, borderline. Borderline meaning, is it really worth the effort, I believe it would be more practical to work in simulation with a 4 lot system and gain the confidence, experience and skills of managing multiple contracts. Undercapitalized traders bring a lot of fear into their trading, fear of missing out, fear of profits evaporating away and fear of losing their trading capital in general. This fear is a powerful force and it is the birth place of many many psychological trading issues.


That is where the notion of "One and Done," can be very helpful to small traders. Let's face it the probabilities of earning any substantial returns trading 1 or 2 contracts is very slim. Especially when given the facts as described above. Working out a 1 or 2 lot trading system that fits all the criteria of acceptable risk, capital and psychology isn't an easy task, but it is possible. The pitfalls are the common ones small traders suffer, overtrading to make back losses, taking profits to quickly then trying to "get back in" on a move just breed frustration. On the other hand, taking one successful 20 tick trade in the Euro and walking away or switching over to the simulator can be a legitimate alternative. The idea of "One and Done," is relative to all the criteria that makes up the system. If you can manage your risk and allow yourself 3 absolute losses a day while only risking 1.5% of your capital for instance you might be surprised at how effective you may become at finding entries. Another factor worth looking at is time, if you trade the EU session limit yourself to the first two or three hours in your live account, same for the US session. The thought of having a money machine sitting in the next room that all you have to do is turn it on is a fallacy. Trading will reveal to you every weakness you have, again and again until you find a way change them. Walking away from the market may seem counter productive to a newbie but ask any trader and most will agree that simply walking away from the screen was a skill that had to be learned.

To summarize the idea of "One and Done," think of it as an action that controls risk first and foremost. By limiting my risk on every trade and staying within my daily loss limit I can take as many entries as my limits allow. IF by chance one trade works "to the letter" and my daily profit goal is achieved I stop live trading for the day. If I enter a trade and exit early due to a sudden change in the market and only achieved half my daily profit the choice to take another trade is still an option. I'm not trying to win over anyone with this post, I just wanted to point out how much ground this concept covered, risk, reward and psychology. I've made some generalizations here to get some points across and by no means were they meant to personally single out anyone. I want to thank everyone for their continued interest in the thread and good trading to each of you.




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Last edited by Cashish; March 13th, 2013 at 05:56 AM.
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Thanks Cashish for the post, a good read and insightful as usual.

I have to take issue with Seykota's logic on that last graphic though; seems kind of an all or nothing attitude, and while large profits once in a while can determine whether the trader makes big money, it's the singles and doubles that can keep us going (especially psychologically) along the way. I think the point is to play to win, but that doesn't mean hit a home run or strike out. Plus, he cited Barry Bonds. Of all the great home run hitters, he picked a juicer whose name, IMO, belongs out of the history books altogether. C'mon man.

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Old School


@Cashish,

I hope our fearless leader is doing ok. I haven't seen or heard from him in quite some time. I, personally, have been dealing with some health issues and not very active trading lately. However, I'm on the mend and hope to be back at it soon .

There has not been much activity in the thread for a while. No questions, no posts recently. I'd hate to see the thread fall to the wayside. There is so much value to be gained and so much to learn from a very successful and experienced trader. I can't thank Mr. Cashish enough for all that he has taught me.

Anyways, it would be nice to keep such a valuable thread alive...just my two cents.

emini

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