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had a real good day today trading gold I applied several things I have read from Mikes Thread
the main one is simplifying my approach to trading , Staying out of Chat rooms and staying focused on trading
saw gold setting up for a bounce early in the morning off what i call a pocket line
reading forum today and studying , finding this community of fellow traders sharing their experiential wisdom has been most helpful to me. I am quickly filling in the gaps of my thinking towards the markets and learning more about myself as a journeyman Trader
"I hate it when I have an opinion because it has not served me well. Even if you want to call it a bias, it can cloud your decisions."
"If I strive to understand all you do about Patterns, Volume, Indicator's and Price Action....., until It makes my head hurt. I might not use them, but I don't understand what you are talking about, so I use them, and it does help me."
I find myself wanting to know why a Andrews fork works like it does. How can something drawn on a chart months ago still show up relevant to current price action . Why do I feel the need to know ?
Why don't I just bring into reality what I see on the chart
That is a question that I believe a lot of you are asking. You look around, and it seems every other thread or post has screen shots of trading performance reports where people are making hundreds or thousands of …
Why aren't you making money yet?
That is a question that I believe a lot of you are asking. You look around, and it seems every other thread or post has screen shots of trading performance reports where people are making hundreds or thousands of dollars per day, yet you are struggling to piece together even a single winning day or a single winning week.
Why aren't you making money yet?
I can tell you with complete confidence that you are in complete control of how much you make, or how much you lose. The people that are struggling the most are the people that refuse to do what needs to be done. They dismiss what is important and focus on what is unimportant.
I'll be specific. I see non-stop posts where traders are continually changing their methods, yet if you review their posts there is no indication in what they are saying that would lead them to be constantly changing things. What they choose to post or show you seems to be working. But it is in our nature to not want to be embarrassed, so naturally most people will only post their best performing days and skip over posting their bad ones. I think a good hint is not so much the performance report that people post, but their actions. Actions speak louder than words, right?
if a trader is constantly changing indicators and methods, those actions speak louder than (screenshots of winning days). Naturally, I can't say this with a complete blanket statement because it will not and does not apply to everyone. Some traders constantly change things out of boredom, but are still profitable traders day in and day out. Some change it as some sort of hobby. I can understand and relate to this, because for instance I have a weakness for automated strategies. They are fun for me. They represent the holy grail.
But when it's time to "get real", I return to what I know. And what I know is that automation fails, discretion rules. More than that, I know that consistency is king, so I keep a tight lid on change. I work extremely hard to blow off days where the trend was so strong that I never had an entry opportunity. I don't go adjusting my chart settings, that's for damn sure. I've been there, done that, and wasted a lot of valuable time chasing indicators and settings.
So why aren't you making money yet? When it seems everyone around you is? Well, first, lets get real. I don't think that the laws of trading simply go out the window here at nexusfi.com (formerly BMT). The majority of traders fail whether or not they are members of nexusfi.com (formerly BMT). I would like to think we are skewing the averages towards success because I'd like to think that my 2,000+ posts, and the 25,000+ posts of others, have helped people not make some common mistakes.
But still, why aren't you making money yet? The answer is simple, you aren't making money yet because you haven't respected trading enough for it to reward you. Yes, I know, it's tough to swallow. But the cold truth is that too many traders keep expecting the answers to tough problems will simply be given to them in the form of some magical indicator or chart, and they focus all their attention in the wrong areas.
They constantly look for that new edge in the form of some indicator they've not yet tried. They look for that edge in the form of some method that someone else has made money with.
But they never seem to look within. The biggest example of failure in this regard has to do with journaling. Based on my experience, the overwhelming majority of you do not keep trade journals. I'm talking about an account of why you entered a trade, why you exited, your feelings in both cases. I'm not talking about some statistical risk management report. I'm talking about a journal where you are open and honest with yourself about why you traded when you did, the direction you did, and why you exited where you did.
So many traders don't keep a journal because they feel they don't need to. I can't even count the number of times or ways I've tried to get traders to do it, and they still don't. Some people just don't want to be helped.
For me, trading is my life. It didn't always used to be this way, but it is now, and as such I take it extremely seriously. This isn't a hobby. This isn't a weekend in vegas or a gambling binge. Trading is everything to me. And it's everything to the people I support.
If you journal and you are still losing money, you don't have to look far to find out why. The journal is all telling. Either you are terrible at reading the market direction, you have poor execution, you exercise poor discretion, or you have bad money management. That about covers everything, and the journal will tell you exactly which one it is. It sure as hell isn't an indicator on your chart, and the sooner you realize it the better.
Don't get me entirely wrong. There are some traders who take it incredibly seriously, journal to no end, and have done battle with themselves in an attempt to conquer their inner demons and become a professional trader. Some of these traders still fail because they attempted to make trading their career when they were ill equipped to do so. The most common example would be a trader who is under-capitalized and tries to start earning a $100,000 a year income with a futures account balance of only $20k. Another example, especially these days, would be a trader who recently lost their job and thinks they can trade for a living instead.
What we have there are two scenarios where you are doomed to failure. Scenario one, under capitalization, is probably the most common. Don't you think it's a bit optimistic to expect a 500% return? Do you realize that if you consistently did even 20% return you could land a job at any firm you wanted? I'm not saying it isn't possible to turn 20k into 100k, but realistically "hell no". Your risk would be so far over extended and any lengthy drawn down term, at that risk level, would kill you.
The second scenario of unemployment which leads to day trading is a sad one. A good number of these people have families to support, and they are going to blow their account and lose everything. Trading when you aren't in a financial position to so is not trading at all, it's gambling. A good number of these types of traders have little to no experience. They think they can beat the odds, and they don't realize that almost any full time trader spent over $100k in "tuition" (blown accounts) to get there. Sure there are always exceptions, but it is not the norm, and you are not the exception my friend.
For the rest of you who journal, are well capitalized, and financially secure otherwise, the sky is the limit. You control your own destiny. It must be nice if you fit into this club, because the majority don't. The majority have to take huge risks and struggle, knowing full well what they are attempting is to defy all odds. Most try to trade without that financial safety net, without the proper account size, and they risk too much and are too dependent on immediate profitable returns.
Anyway... I digress If you haven't got sick after reading this post, then I hope you will start a journal and be open and honest about your trades, your account size, and your financial situation. If you can't handle the embarrassment of this then you almost certainly can't handle being humbled by the markets as a professional trader.
BTW, for those wondering about me -- I am a mixture of the two "bad" scenarios. I had a big bank account but lost my job. I have traded off/on for over 10 years now, but only in the last 2-3 years with futures, and blew out two accounts worth about 100k. I nearly lost everything before finally realizing I controlled my destiny and I stopped looking to indicators or automation to solve the problems with my trading. I have my family to support and have had great struggles, but I also know that I am in complete control of what happens next, and that knowledge and the faith in myself and what I have learned gives me the strength to keep going forward. The more I move forward, the better and stronger I become.
That is a question that I believe a lot of you are asking. You look around, and it seems every other thread or post has screen shots of trading performance reports where people are making hundreds or thousands of …
"Either you are terrible at reading the market direction, you have poor execution, you exercise poor discretion, or you have bad money management.
" That about covers everything, and the journal will tell you exactly which one it is. It sure as hell isn't an indicator on your chart, and the sooner you realize it the better." ...BigMike
Excellent Big Mike.
The majority of new traders come to this business to "make money" and therein lies the problem.
Anyone who takes on any profession to make money will never be a professional.
The oldest profession in the world teaches us that.
The key is an intense desire to be a consistent trader in full control of our emotions and love our work.
Marty Schwartz who wrote Pit Bull spent 10 years as an analyst before taking a trade. Back in 1983 when I met a trader in LA he advised me to get a job as a broker and watch how people lose money. I did.
Always, always they trade to make money. They always end up losing. A few, a very few go on to study themselves, learn from errors, keep a journal and develop a simple edge. Why? Because they love the art of trading.
Today I am trading the same way as I did in 1986. I drew a 15 minute chart by hand for 4 years and used one indicator. I added one new tool in 1998 and another in 2003. I have examined dozens of indicators and systems and my former trading team traded them with millions of dollars. They made money because we traded 30 markets with 5 or more systems all extensively back tested. But for me I did not love this way of trading.
I retired from all that and took my own account and traded my own way with my favourite tools. I still do today. never to make money, always to gain the bliss of mastering the uncertainty that trading brings. As a result my account grows every month.
I do get help from my angel of trading though. That's because I listen!
I disagree. I went into this before in this thread, but basically I sum it up like so. If one single trade can make my daily nut, then it changes everything. If I can keep a runner on and come out with 120 or 150 ticks in a single trade, then I am done for the day and therefore my risk is now zero for the remainder of the day.
Let's say you analyze 1000 trades of your setup. It seems unlikely that the largest MFE will also be the largest percentage winner. What I mean is that if you were to classify trades in groups, say 15-25 ticks, 25-35 ticks, and 35-50 and 50+ ticks, it is not likely that more than 50% of those thousand trades you analyzed will fall in the 50+ tick category for MFE.
In fact, it's probably much more likely the majority of them will fall in the lowest category, in my example that would be the 15-25 tick category. You might choose to just go all in/out at 20 ticks then (the median) but unless you are willing to trade a great deal of contracts on one single trade, you'll have to do it more than once to meet your daily nut. And since adding contracts also causes a great deal of psychological impact, it's not something I want to do.
So, in my opinion, I would rather have a tiered approach and have gradual exits at high percentage areas, and also have the ability for one single trade to meet my daily nut by hitting say category 2, 3 and 4 all on one trade, so I can stop trading the rest of the day.
Some may say trading is a science, and you can apply pure math to it. I am not going to say that. Discretion is required, emotion is meaningful, psychological concerns have a direct impact. For me, I will trade 3 targets.
Here are some Money Management thoughts. I came up with these after having a quick conversation with another trader who, in my eye, has very weak money management skills.
He's been trading stocks and doing ok, but he often averages down and his …
I think you started somethink interesting. Now question is how we can apply this to trading.
I am going to quote from this newspaper:
THE Right Brain vs Left Brain test ... do you see the dancer turning clockwise or anti-clockwise?
If clockwise, then you use more of the right side of the brain and vice versa.
Most of us would see the dancer turning anti-clockwise though you can try to focus and change the direction; see if you can do it.
LEFT BRAIN FUNCTIONS
uses logic
detail oriented
facts rule
words and language
present and past
math and science
can comprehend
knowing
acknowledges
order/pattern perception
knows object name
reality based
forms strategies
practical
safe
RIGHT BRAIN FUNCTIONS
uses feeling
"big picture" oriented
imagination rules
symbols and images
I think that "right brained traders" will respond better to colors,waves,interesting pictures.Imagination is the key. Money management can be the problem. Anything with numbers does not fit. Good picture makes the difference. They will like charts. They cannot trade by numbers because its against their nature. They don't like to remember numbers, but they can create ideas.
I am right brained and looks like close to 100%. The girl is turning right for me and I cannot see it other way. My interests confirm this idea.
ITs good idea try to find out what is the best way for me to trade.
Maybe this can help new traders to get on right pass from the beginning. This can be the key. To go against own nature can be a loosing game from beginning.
If other people add to this we can figure it out what type of trading is suitable for each type of person.
that dancing girl test is interesting if i look directly at her she goes clock wise , if i look outside the screen keeping dancer in my perifual vision she goes counter clockwise , its a trick on the brain caused by shadows to me
Well this is a thread I've been meaning to create for a long time. It's not a journal of my trades. It's just a collection of thoughts.
If you don't like them, then don't read them :) But the intention in posting to this thread …
You guys know how much I love the nexusfi.com (formerly BMT) CollectiveMA and the nexusfi.com (formerly BMT) Envelope Expansion Fib Bands. I think they are great tools.
But, I also think they are not necessary to be successful. In fact, I don't think any indicator is necessary to be successful.
In the last few weeks as I've moved to MultiCharts, I've had to reprogram some of my favorite indicators like CMA and the bands. In doing so, or I should say perhaps before doing so, I was getting used to MultiCharts and playing with setups and charting without any of my tools.
What I found was that I still had a keen "sense" of the market, even without the CMA, even without the bands. I could almost instinctively "see" where the CMA and bands were, wrapped around price and interacting with price.
I've since gone on and developed both in EasyLanguage and I'll be sure to share them out to the Elite group for any TradeStation or MultiCharts users. I still think they are great tools, but the point of my (rambling) story is that if you ever feel as though you are dependent on a particular setup or indicator, then I think you are probably not yet to a level where you are a profitable trader.
Some say that an edge is required to be profitable, and they define that edge by using indicators. Not just methods, but indicators. While no one will dispute that you need an edge to be profitable, I do dispute that you need indicators to have an edge. It is my sincere belief that the edge is YOU. The edge is your experience on reading the markets, your experience of knowing when and when not to trade, your experience of knowing how to minimize risk and maximize gain, your experience to have trade management, risk management, and money management.
I can think back a few years ago when I was reading Elite Trader and seeing some people keep posting stuff that didn't make much sense to me. They were posting about "concepts" like price action setups, risk management, money management. I couldn't be bothered with them. No, I was on a search for the holy grail and was looking non-stop for the best tools I could find or learn to develop on my own in order to reach the grail.
It is only with years of experience doing this an exhausting 80 hours a week that I've learned that while indicators are pretty and even useful, they are not required nor do they define your edge.
I may use an indicator to help me time an entry, but I don't take every entry nor do I even think for a moment that I should. The last few days I've even taken off my pivots and daily high/low indicators, because with MultiCharts I am much better able to see the bigger picture (the charting is better to do this, for me) so I found I didn't need them and they were just cluttering my screen.
For those brave souls who have read this far into my post --- my point is this: if you are not making money today then you MUST, absolutely MUST start focusing on the psychology of trading, the risk and money management, and you MUST and I mean MUST stop focusing on indicators, changing your charts every day, and you MUST and this is a critical MUST be patient and know that trading is to be treated as a business, and it will take years of losses before the business starts to turn a profit.
I have many friends in the forum that are struggling with this, constantly changing their charts and they never pause long enough to really focus on themselves, nor focus on their actual trading. All they focus on is indicators! Many traders want better and better data feeds, faster and faster execution, more sophisticated tools -- and they think that "if I had these, I can finally make money!" when in fact it isn't required. Look at how much money you've lost up to now without these things. If it was that easy to lose the money, it is that easy to make it. You just have to conquer your inner demons, get a handle on the psychology and fear of trading, and focus on adding to your experience slowly but surely while all the while setting reasonable goals and measuring yourself against them on a non-stop basis so you can improve and refine along the way.
Mike
#363
Excellent post Mike . I spent probably 90% of the time I devoted to learning the nuts and bolts of trading on indicator / oscillator research . After 3 years I was exactly where I began - confused and blaming indicators and I bet most people have similar experiences . The only consistent results I achieved either sim or live came after I was able to admit to myself that my attitude and stubborness kept me from profitting so indicators cant help me address and deal with those things , only I can .
#365
Cory - Exactly. And our brains trick us by seeing the ones that hit the lines and filtering out the ones that don't.
Ever get a new car and then notice that everyone has the same car? I remember I got a honda accord in '98 and all of a sudden everyone had one. I saw them everywhere. We all must have bought them at the same time!
No. they were always there. i just never paid attention.
and this is how it is with indicators & lines. we see when they work and don't take into account all the false alerts. I've found this out myself while working on a new indicator. so now I use it not to give entry signals but just to tell me what's going on. for example, I don't want a dot saying "professionals active enter here" I just want to know "professionals active start looking for your own entry setup". This is the key to using indicators in my opinion. and this is why i never succeeded in automating anything using indicators. it's not black or white.
Great post Mike. Just one part I'm not sure about and it's the psychology and I wonder if that's because I have the psychology down and it's no longer an issue. I wonder if psychology is really that important. It seems simple really.
find an edge
trade it
repeat
position sizing is easy too. 1 contract on sim until profitable, 1 contract real money, and then increase slowly risking no more than 2% of the account
I considered getting the psychology books but I ask myself "do I really need them"? If one can make money every day, follow the trading plan, what else is there?
so psychology is the unknown. And I look forward to more discussion on that.
# 371
If I have no edge, psychology doesn't matter. If I don't have the psychology, the edge doesn't matter. To be profitable I need both, but I think having an edge builds the confidence needed to execute the edge effectively and consistently. For me having a clearly identifiable edge is primary. That means I can eyeball it without having to mine tons of data on a spreadsheet to see it.
#372
Let's talk about focus, energy, discipline, experience, humility, financial security, and motivation.
Today I've started reading a new book, "Evidence Based Technical Analysis" by David Aronson.
I really like what I am seeing so far. The author tests over 6,000 indicator combinations with the purpose of determining if any of them have predictive qualities. He uses 30 years of market data. The result is that none of them do. But that isn't spoiling the book, the book itself is the journey and testing methodologies themselves and that is what I find fascinating.
One thing occurred to me as I was reading the early chapters of this book. I've been preaching about how psychology and money management are what control your profitability, and how indicators are not the answer.
Perhaps I need to reshape that a bit and apply more focus to this: your goal as a trader is to beat other traders. Nothing more, nothing less.
Really, truly, that is what it comes down to. In order for you to "win" trading, someone else has to lose. When an indicator tells you to take a position, or you look for market bias and trends, gap plays, breakouts, etc -- all of these things are inconsequential in the big picture. You may analyze, as David did, 30 years of historical data and find that one particular occurrence or setup happens during the current conditions and play that setup as an edge, but at the end of the day your balance sheet will reflect whether or not you beat other traders, or if they beat you.
Everyone has heard "buy low, sell high" or if that doesn't work "buy high, sell higher". Everyone has heard "cut your losers, let your winners run". I really think you could delete everything except these two statements, remove all indicators and methods, and just by following this advice you have the tools to be a successful trader. In order to beat the pack, all you need to do is make better decisions than the majority of the other players on the field.
"Is that all? Gee so simple!", I hear you saying... I didn't say it was easy, but it is simple.
The point I am trying to make is that in order to trade better than the rest you have to make smarter decisions than the rest. And I don't think those decisions are benefited by any value an indicator, oscillator, gap play or method. The decisions are all within you. You have to be at the top of your game in terms of focus, energy, discipline, experience, humility, financial security, and motivation. In each of these areas you must outperform or best your fellow traders.
The countless hours (hundreds or thousands of hours) that people spend on indicators would be better spent on practicing or bolstering your focus, energy, discipline, experience, humility, financial security and motivation. For example, if each day you are spending 4 hours a day on backtesting and you do it six days a week, perhaps you could take those six days focus on one of the above items instead, rotating them in and out on a daily basis.
It may sound odd, but I think the time is well spent.
Mike
# 377
The Edge
I love it when I read confirmation that backtesting indicators has proven fruitless.
At the heart of every programmer who gets introduced to trading he believes he can program a consistent edge. They will all be singing "Still haven't found what I'm looking for in another 20 years."
Then there are those who sell indicators at all prices. Educators and chat roomers. All doing the same. Looking for risk free income. Sign up to get the latest whiz bang indicator.
My brother wanted to learn how to trade. He pestered me for 2 years. I gave in and set him up with a simulated account. After a month he was ready to go 'live' real money. I said 'No Way'. He refused to listen. He blew two accounts and $50,000.
It was painful to watch. Finally I AGAIN said, 'Screen Time and Go Sim till you have a profit factor above 2.0 on over 1,000 trades'. He blew sim account after sim account. Then finally he turned a corner. Now he makes $800 to $1000 a week. It's taken him 3 years. His profit factor is not yet above 2.0 but it is above 1.0. Whew!
The edge I use speaks from the still small voice within. No, correction, screams at me, 'Buy this baby, she's going Up!' I just click and click and click till I have enough size and then sit back and watch. I've done it thousands of times.
I never think during trading about anything except executing orders correctly.
I am busy all day listening for the still small voice that screams...BUY...SELL!
