Glad to see you're back and glad to see you're still trading.
Let me tell you a little about my approach, maybe it will help you. Trading oil futures my methods have always
been my own. I never felt the need to use anybody else's ideas and aside from looking at a couple books
like Volman's, I've never felt the need to seek out anybody's else's methods. So if you have your own trading
method that seems like it "almost works", that's a pretty good sign that it will work with a little
tweaking. No need to go seeking out brand new methods.
As I said before, it doesn't matter whether you have an up day, or a down day. As long as your strategy gives you
an edge over a large number of trades, then it will work out in the end. You can't be getting emotional about the results
of any particular day.
I'm sure the main cause of distress is that you simply don't know whether your strategy has that edge over time. And
that's a tough one, because it can only come by seeing it in action over a long period of time.
But there is one thing you can do which will give you an idea. Backtest your strategy in Tradestation. Just be sure you are backtesting your actual strategy.
Or pick two of Volman's methods and backtest those. This will give you a really good idea of whether they are viable or not. It will also teach you a lot about trading strategies
in general because you can instantly see the results.
I personally am flexible in my setting of stops and profit targets. I look at price areas rather than
specific price points. When I enter a trade I set a stop loss based on a general area rather than a
certain price. Same thing with the profit objective. These "areas" (price ranges) are the result of my interpretation
of price behavior, and therefore as the behavior evolves and changes, these areas may or may not stay the
same, and so profit and loss targets might change too. In any case, you certainly don't need to trade in this
manner, but if you are encountering a lot of situations where you stall just a few ticks shy of your
objective, then it help to be a bit flexible.
I trade according to setups that give different ranges of profit and loss objectives. Some of my trades have a
profit objective of 10 ticks. Others 25 or 50 ticks. When losses start adding up on me, I start looking
for the "higher probability"/"larger range" setups. In this way if I'm working out of a 30-tick loss,
then I may strive for the entire 30-ticks in one trade, or perhaps break into chunks of 15 each or something.
Same thing with stop losses. Some of my trades have a very tight stop, others have a large stop. It all depends
on my assessment of price behavior. I'm flexible in this as long as the price behavior permits me to be
flexible. I guess what I'm getting at is, carrying a loss on a trade is a necessary part of trading, and
the conditions are dynamic so you may need to adjust that stop in real-time, tighter or looser, to reflect
This of course is the opposite of what Volman advocates, which is a hard-coded stop point and profit point
on every trade. In my personal opinion, both methods are valid and probably end up giving you about
the same results when all is said and done.
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MisterGopher, your last trades looked great. On the 6E no less. Bravo!
Hope you found what's working for you since your previous update. I took a look at Volman's book. Personally I wasn't impressed with the setups or the trade management but maybe that's because I've been through a bunch of other methods already in two years. Seeing that you've only been trading futures for 5 months, if you're still having
uncertainty reading the price action, I would suggest the popular Al Brook's material, if only to learn about BPA. Not necessarily having to use his setups while still using your own.
on the first setup in that first picture, what you want to do is put a stop below the lowest bars just before that mini "breakout". See the two low bars around 18:16. So you want to put a stop some reasonable distance below them. The idea is that the little breakout won't stall and go below those two bars if it is a true breakout. For this trade you want to put a profit target in the vicinity of and below the tops of the highest bars in the graph to that point. Say around 1.3330. The idea is that those highs represent a resistance area (congestion) and you expect a good possibility prices will stall around that area but you should not try to predetermine a specific price point. You need to be flexible. And so I always give it the benefit of the doubt and assume it may stall and reverse before it gets to the actual highs of those bars.
On the second setup in that picture, my strategy would be the reverse of what I just described.
The second picture I personally would not trade because there's not enough volatility to indicate direction. It seems like gently undulating stuff and I have a hard time determining what it means.
The first half of your third picture. Here's what I would have done:
(a) gone long around 3:47:08 for a retracement to a point about half way up that long green bar to the left and a stop below the lowest of that long green bar. Then several bars later as it is apparent no quick retracement is occuring liquidate at flat
(b) Prices bewteen 4:00:06 and 4:21:10 seem choppy with no consistent areas of congestion (resistance, support). do nothing
(c) prices bewteen 4:21:10 and 4:44:00 seem like a gently meandering "trend" or whatever. I never trade gently meandering stuff. Do nothing here.
(d) Go long on that upward breakout at 4:58 with a stop in the lower 25% of that first long green bar, and a profit target about half way between my entry and the congestion areas previously indicated on the chart in the 1.3342 area. And then just wait and see what happens. The back-to-back series of long green bars immediately after entry wouldn't phaze me because the thrust of the initial breakout should be strong enough to make that irrelevant as long as it doesn't get back to the lower portion of that breakout bar.
Basically with breakouts you should assume that it is not a legitimate one if the price goes back to the lower 25% of the bar that indicates the breakout.
There's two kinds of breakouts that indicate a trade to go long: there's the reversal off a bottom and there's a breakout above a resistance area. To trade either of these you first have to have a clear establishment of congestion areas in those regions. The "gently undulating" prices don't give any clear indication of that, which is why I don't trade those.
When you're trading a reversal off a bottom this is a retracement and you can assume basically a 50% retracement will possibly occur. So you could put a profit objective at 30-50%.
When you're trading a breakout above a resistance are, look backwards in the chart to determine the next resistance area farther up, and put a profit objective maybe 50-75% along the way to that next area.
If there is no next area (ie price is making new highs), you don't put any profit target. You hold it (in fact you should pyramid, ie add to your position) and then just let the price action determine the new resistance and support areas on its own.
The same type of principles apply in reverse when going short.
Last edited by mwtzzz; January 23rd, 2013 at 10:31 AM.
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10 trades, -20 ticks. Charts posted with some commentary this time. Huge thanks for the analysis on my last post. You both blew me away with the time you put into it. I read them both multiple times trying to really understand your thought process.
I'm really feeling bad today. I can't help it. You guys are like machines and I just want to be successful so bad and I am starting to feel like I don't have the ability/time to get to where you are. I am afraid for my account now and am starting to wonder if I should take a break and close it out. I'm down 25% of my 10k and what is next, $5k? I can't help but think about my account balance and "getting back" and I know that is dangerous.
Probably overtrading. I bet a lot of those trades, if you had let them sit longer would have shown you some profit instead of loss, right?
I view trading as nothing more than a game of probabilities. If I have a 20 tick loss, then I'm looking for a good setup that will give me 30 ticks. I try to avoid making up a 20-tick loss with a series of 5-tick wins.
Why don't you take a breather, forget everything you've read, forget all the advice, and take some time to study the price behavior on your own. Watch it and study it without preconceived notions. Take a general view of it and see if you can figure out some basic, repeatable patterns.
Like, for example, in CL if the price drop 120 ticks within an hour, chances are quite good that it will retrace 30% of that quickly, and maybe retrace 50% of it over the next several hours. That's a setup I play all the time (well, at least when it happens, which is not often, these days maybe 3 or 4 times a month). Not guaranteed, but it works more often than it doesn't, and that's how you make money.
If you can develop your own general, basic observations, then that's the best first start.
There are setups that are higher probability than others. Ones that have a much higher chance of working than not. If your money is dwindling and you can't afford to lose any more, then these are the setups you need to wait for.
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Wow, that's a lot of trading. As we all know, the dumb way to trade is to buy and hold something hoping that you eventually get a profit. Actually if you had enough patience and an unlimited supply of money to weather drawdowns, this actually would work most of the time. In your chart it would work if you had gone long at any point except those three top peaks on the left-side.
When would it possibly not work? If you go long at the end of a strong move upwards or if you go short at the end of a strong move downwards. Yes it could work if those moves continue. But it won't work if that happens to be the end of the move.
So how do you deal with those things? Start thinking in terms of retracements. A simple and valid way to trade is to enter on a 50% retracement. After a big move upwards has occurred, wait for a 50% retracement and then go long. Put a stop loss at the 80% retracement level and put a small, but reasonable profit objective, say 10 ticks or a 20% "retracement against the retracement". Chances are more often than not your profit will be hit before your stop loss.