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Short term TF trading


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Short term TF trading

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  #291 (permalink)
Kampala, Uganda
 
Experience: Intermediate
Platform: TOS
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indextrader7 View Post
I used to constantly fight the trend and try and pick reversals. Cost me a lot of money.

First off, we can only see that we're at extreme levels (highs/lows of the day) in hindsight, so it's irrelevant for our real-time analysis. I think if you focus on the proper analysis in real-time it will remove the tendency immediately. Try:

1. Define S/R structure on a longer timeframe chart than the one you're mainly trading. Somewhere between a multiple of 5-10x that timeframe will do. Don't pay attention to anything you see on that chart (trends/patterns/etc) because it will be very irrelevant in your trading timeframe. (I used to make the mistake of trying to trade signals on one timeframe, on another timeframe chart. It doesn't work).

2. Define your trend/range on your main trading timeframe. This is the key one to your question. We don't care whether we might "think/feel" like we're at an extreme level or what not. We simply define whether we're currently in an uptrend, downtrend, or range-bound. This determines what type of trade (long/short) we're looking to take. Picking tops/bottoms is a fools game (in my humble opinion, maybe there are guys out there that are fantastic at it, but I think the majority of the time it's bad business.) Now, if we're in a downtrend and heading into one of the longer term support levels we drew in step 1... AND we're analyzing the momentum of that downtrend, AND it's showing weakness on the down legs, and more and more strength on the up legs... then we can take a long trade which is still considered a counter-trend trade (and managed accordingly), but the key is that our analysis of strength/weakness led us to this counter-trend trade... NOT a thought/feeling that we're over-extended/oversold/at an extreme/"price can't go any lower it's gone so far"/etc.

So no, I don't do anything different at these levels. My thought process is the same. The only thing that's different is that sometimes you feel "naked/exposed" because we're trading at levels that don't have any recent S/R to give a framework... we're just floating out in space so to say. We can still rely on our trend analysis and will always have that, regardless of where we're trading.

Hope this helped. Let me know if it didn't, and clarify further.


IT7...

You nailed it in this post. It was exactly what I needed to read.

On this particular day of dealing with trading at the lows of the day, I had made a handful of great trades earlier in the day, and ended up giving back all the profits trying to catch the falling knife. Then, after it fell some some, I placed a revenge trade out of frustration which put me in the red for the day. I know it was metal mistakes that cost me and had me trading outside of my plan.

Your words on looking at a higher time frame for S/R is very helpful...I can get so dialed in on my trading time frame that I subconsciously disregard the other time frames that I monitor...

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  #292 (permalink)
Kampala, Uganda
 
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indextrader7 View Post
Hey, I just want to put a disclaimer on some things I say in this post. They may come across as harsh, condescending, or pretentious, but they're coming from a good place in my heart. Text is hard to pick up on emotion sometime. I'm taking the time to do what I think will help you based on my own experiences, which is all I have to go by. Ok, here's the post.

I may sometimes take what looks like an anticipatory trade on the trading timeframe, but that's when I really want to take a trade against a S/R level for whatever reason. and then (this may help you a lot) I drop down to a lower timeframe and look for some type of reversal pattern/signal/candle and use a stop order to get me in if that pattern follows through there. It's the best of both worlds as it gives you a good R:R, while also giving some confirmation to take the trade.

How did I overcome the tendancy? I found what works for me ^^. Once you do find what works, you don't have to fight against anything. We will do what we believe is best. It comes down to belief systems. Evidently, you need to work on yours. If you truly believed that picking tops/bottoms was a fools game... and I mean truly believed... then you 100% would not do it. There wouldn't be any internal struggle or anxiety or even discipline required. Beliefs! Beliefs! Real beliefs!

Another thing Wolf, is that you may have something else in the way (if you do already believe it's a fools game to catch falling knives), you may know this... and be seeking the thrill of trying to pull off this low % trade! You must find out for yourself. It could be tons of things.

Here's something I want to say about discipline. Some people say that trading requires discipline. I don't believe that. I don't want to insult anyone, but I think it's an "immature" level of a trader if they do. (Not referring to you Wolf, just ranting a bit here.) Think about this... If you know what movie you want to see, and you know how to get there and see it, and you're available to go see it, does it take discipline to go see it? No. Trading is no different.

From some other things in my trading journal (paper) from 5-6-12:

Finding an edge isn't the hard part. It's fairly easy to find. Self awareness is they key to self-management. We can't really control our emotions, we can only control our actions DESPITE our emotions.

Must have ability to tolerate discomfort, and be ok with disappointment.

Self confidence is resilience in the face of discomfort. We try to avoid the discomfort, and the problem is in our actions to avoid the discomfort. Avoid boredom by taking marginal trades, avoid fear of missing out by chasing/impulse trades, avoid anger of being stopped out with a revenge trade, avoid being wrong by hesitating to enter a trade or not exiting a bad trade quickly. All this behavior is some type of discomfort avoidance.

Learn the patterns of your discomfort. This requires a high degree of self-awareness.

Discomfort is unavoidable in trading. It's a big part of it.

Willpower and a desire for money are not enough to change one's behavior. Need to be more open/flexible - motivated to understand yourself. Open minded = more awareness = see things you didn't before and CHOOSE your actions.

Discipline isn't willpower - imposing a demanding "must do" thought. The emotional consequence of not following a self told "must" is huge and counter-productive.

In trading the going always gets tough at some point. The discomfort is a part of trading, hiding them with willpower won't help. Realize the emotion and understand why you're feeling what you're feeling, then CHOOSE (a different) action. To deal with discomfort you must have self-confidence which is resilience in the face of disappointment and self trust.

Learn to control what is WITHIN your control and let go of the rest.

Next time you feel threatened (example, when you want to book a quick profit) think about what you would typically do - what did you do last time? how did that work out?

Anticipate your emotions before they're fully formed. Stress and discomfort are on the way, are you prepared?

Uncertainty is a certainty.

Successful trading = a lot of trades that aren't winners. Focus on doing what's right, not being right.



This is GOLD!

Thank you for the time, dedication and transparency you put in this thread!

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  #293 (permalink)
Birmingham, AL
 
 
Posts: 1,065 since Apr 2012


Good trading today. Had 60% losers, but had an average win of 2.2x my average loss. You can see I did a good job today of keeping losers small.


Ticks/trade:
-8, -5, +13, -3, +8, +5, -9, -2, +18, -9, +4, -3, -5, +10, -5, -2, +14, -10, -2, +9
Total = +18 ticks

One or two pretty dumb trades, but didn't let them get too far. Tried a few scalps in the latter part of the day, which only ate away at my gains.


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  #294 (permalink)
Birmingham, AL
 
 
Posts: 1,065 since Apr 2012

Daily P/L to daily max drawdown. Something that is a focus of mine now.

Here it is since I started keeping up with it on 5-7-12.



Looks to be improving. (6-1-12 I didn't have a drawdown, so I just gave myself 2.5x... not sure how to deal with that. The most important thing to me is that I consider that day a great day, and I want that stat to look good for that day) Here's the ratio of the previous graph showing both P/L and DD for the day. This one just shows the ratio of the two.

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  #295 (permalink)
Birmingham, AL
 
 
Posts: 1,065 since Apr 2012

Interesting to see the consistent trade off between win% and win:loss ratio. It's really finding a balance between the two, but I'm always looking to improve both at the same time. Hard to do that for sure.

The last three swings in Win% (down up down) are exact opposite of win:loss (up down up). We'll keep trying for up up up.


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  #296 (permalink)
Birmingham, AL
 
 
Posts: 1,065 since Apr 2012

Quite pleased with reducing the size of my drawdowns as of late. This is certainly due to me not scaling into losing positions and jacking up the risk per trade. Here's the % drawdown chart from May onward.



One interesting thing to monitor is a ticks drawdown chart. This gives me a better picture of what type of drawdown I'm capable of... as far as actual trading performance drawdown. The % drawdown is important, but it's a very different type of information. The % drawdown chart can take a huge dip on a single trade if I load up on a bunch of contracts. The ticks drawdown chart shows me what life is like from a pure trading performance perspective, as if I traded level contract size all the time. Here's the ticks dd chart since I started full time in February. Getting down 96 ticks is the worst performance drawdown.

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  #297 (permalink)
Legendary Market Wizard
Georgia, US
 
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IT7, I did a little browsing on risk adjusted performance and found a metric called the Calmar ratio:

Calmar Ratio Definition | Investopedia

It is essentially what you are doing here, only it typically measures a fund's performance over the last 36 months. But the principle could be over any time frame. In short, it is rate of return divided by drawdown. Simple, but effective.

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  #298 (permalink)
Birmingham, AL
 
 
Posts: 1,065 since Apr 2012

So, as some of you may know. I scalped during the month of May, and ended up not happy with the true performance. Made $, but it wasn't near as steady and good from a risk-adjusted perspective.

This rolling ticks P/L chart paints a pretty clear picture. I started out (price action trading), and had large periods of ticks profitability, with small periods of negative ticks for the rolling period. When I transitioned to complete scalping, the returns became quite sporadic (as annotated on the picture with the pink arrows). Now that I've gone back to regular price action methods, sure enough... a big block of profitability has begun and I'm still in it.



On another note, does anyone have any ideas why there seems to be somewhat of a cyclical pattern to my performance? Probably can't tell much from this chart alone, but maybe someone has some ideas as to what I could look for in my data to see what's causing the cycles. Maybe it's just that I can't be profitable all the time and this type of cycle naturally will form. I think there's more to it myself. Here's a blank one to see.

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  #299 (permalink)
danville ca usa
 
 
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On another note, does anyone have any ideas why there seems to be somewhat of a cyclical pattern to my performance? Probably can't tell much from this chart alone, but maybe someone has some ideas as to what I could look for in my data to see what's causing the cycles. Maybe it's just that I can't be profitable all the time and this type of cycle naturally will form. I think there's more to it myself. Here's a blank one to see.


Indextrader7:

Some reasons for the cycles could be:

The daily range during the hours that you trade (versus the entire trading day range)... ie the best time for me to trade is 5am-8am pst. Trading after 8am is not as profitable.

The natural cycle of inside and outside days... ie small inside days are much less profitable for me than large range outside days.

The structure of the moves during the day. ie A huge move during a small part of the day and the rest of the day is just chop. This allows me a couple of chances at a good trade and the rest of the day for my losers.

Last is how the moves roll out. Sometimes there are days where individual candles are larger than my initial stoploss. Sometimes there are days when price moves in a direction for a long time, but the pullbacks are just a bit larger than my stop during the trades.



At least these are the excuses that I use when my trading day sucks.



toucan

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  #300 (permalink)
Birmingham, AL
 
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indextrader7 View Post

On another note, does anyone have any ideas why there seems to be somewhat of a cyclical pattern to my performance? Probably can't tell much from this chart alone, but maybe someone has some ideas as to what I could look for in my data to see what's causing the cycles. Maybe it's just that I can't be profitable all the time and this type of cycle naturally will form. I think there's more to it myself.


I'm not sure if this has anything to do with it, but I see you are using a 50 trade rolling calculation for your charts. If you have large winners (or losers) in the data then they will "roll" through the daily value as they fade into history. I tend to agree with Toucan that it may simply be volatility cycles from day to day. You get larger wins then you get smaller wins (as the absolute negative swings are small it seems losses are not as big a factor as variation in the size of winners). This is just speculation, but you could mine through the actual data and see which is having more impact. Try changing the rolling period and see how that affects the apparent cycle.

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