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TST Combine Journal

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  #231 (permalink)
PTA, Gauteng
 
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Hey it7,

Im an avid price action fan but am very much a student and battle to see what more experienced PA traders like yourself see on the charts sometimes. I've marked up your chart from yesterday with what I see. I see a horizontal SR line, and two potential long trades when price pulls back to that point. The last trade you took is one I would have taken. But I would not have been able to see the first 3.

If you dont mind, please could you explain what you were seeing to make you enter those trades. What was your reasoning. (it's not really important that the first was a loser and the 2nd was a scratch. The point is that you're seeing opportunities in the price action, you're taking the trades, and keeping your risk low).

Sorry for clogging up your combine journal with this. Just looking to grow and learn as a PA trader.

Many thanks.


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  #232 (permalink)
Orlando, Florida, USA
 
 
Posts: 34 since Oct 2010
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Just out of curiosity, I ran some numbers on a comparison of someone who made 109K (bumping up against max taxable income for SS and Med.) from trading their own futures account and someone who went the TST route and made the same amount, assuming the 60% level of profit split all success, happy, happy from both parties. Assumption is standard single deductible ($9750)

Trading your own account (values are ballpark close):

Total trading gains around $109,000
Avg daily gain is $454
60/40 tax rule, no SS or Med. taxes taken, net income is $92,510

TST partner:

Total trading gains around $181,606
Avg daily gain is $756
Standard income with SS and Med taxes, net income is $79,840

Difference in trading gains between the two is $72,606
Difference in net income between the two is $12,670

Guaranteed losses of a TST trader vs private trader both making $109,000 gross income:

The TST trader "loses" $12,670 to the govt and some net (after taxes) off of an additional gross income of $72,606.

[$5,000 of that could have gone into a non-taxable Roth IRA for 30-50 yrs of future investment opportunities and $7,670 for ski trips and such.]

This was a fun exercise for me and not meant to rattle any feathers. I'm self-funded, been at this close to 10 yrs full-time now and know all about the sufferings which go on when trying to break through to consistent profitability and long term success. The sacrifice goes way beyond any risk of trading loses because you also give up the incoming zero risk money of a normal 9-5 job.

The long call with TST is initially cheap. No doubt. For the person on a shoestring trading budget, it's perceived as a godsend opportunity. However, if one proves to be successful, take a closer look at where all of that hard earned money is going, not just your gross take. You're still the same person with the same skill set. A positive expectancy system doesn't care whose pile of money it works on but I hope I've at least shown in this example that the flows of money don't have to flow so swiftly for better and better yearly incomes when it's your pile.

We are very much different animals. You are strongly attracted to trading higher levels of leverage and Other People's Money. It has the benefit of greater upside potential. I originally pictured you (a year ago) as a young man who would be content making around 100-250K a year. You want more, sooner rather than later. The office rental digs you had vs. the modest apt and original PC setup had me wrong in my original assumption. My bad. However, there is nothing wrong with thinking big. That's how virtually everyone who does make it "big" thinks. Levels of risk, stress, perceived quality of life...all decisions made based on what our mental/emotional make-ups can tolerate.

This is my last post in this thread. But I will be on the bleachers with my hot dog and beer, cheering you on. Best of luck to you.

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  #233 (permalink)
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TST is for traders that need to hone their risk and discipline skills. TST is also for traders who are underfunded. TST is not for existing profitable traders with their own money, in my opinion. Why some people insist on thinking that TST is for everyone makes no sense to me...

Mike

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  #234 (permalink)
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SteveH View Post
Just out of curiosity, I ran some numbers on a comparison of someone who made 109K (bumping up against max taxable income for SS and Med.) from trading their own futures account and someone who went the TST route and made the same amount, assuming the 60% level of profit split all success, happy, happy from both parties. Assumption is standard single deductible ($9750)

Trading your own account (values are ballpark close):

Total trading gains around $109,000
Avg daily gain is $454
60/40 tax rule, no SS or Med. taxes taken, net income is $92,510

TST partner:

Total trading gains around $181,606
Avg daily gain is $756
Standard income with SS and Med taxes, net income is $79,840

Difference in trading gains between the two is $72,606
Difference in net income between the two is $12,670

Guaranteed losses of a TST trader vs private trader both making $109,000 gross income:

The TST trader "loses" $12,670 to the govt and some net (after taxes) off of an additional gross income of $72,606.

[$5,000 of that could have gone into a non-taxable Roth IRA for 30-50 yrs of future investment opportunities and $7,670 for ski trips and such.]

This was a fun exercise for me and not meant to rattle any feathers. I'm self-funded, been at this close to 10 yrs full-time now and know all about the sufferings which go on when trying to break through to consistent profitability and long term success. The sacrifice goes way beyond any risk of trading loses because you also give up the incoming zero risk money of a normal 9-5 job.

The long call with TST is initially cheap. No doubt. For the person on a shoestring trading budget, it's perceived as a godsend opportunity. However, if one proves to be successful, take a closer look at where all of that hard earned money is going, not just your gross take. You're still the same person with the same skill set. A positive expectancy system doesn't care whose pile of money it works on but I hope I've at least shown in this example that the flows of money don't have to flow so swiftly for better and better yearly incomes when it's your pile.

We are very much different animals. You are strongly attracted to trading higher levels of leverage and Other People's Money. It has the benefit of greater upside potential. I originally pictured you (a year ago) as a young man who would be content making around 100-250K a year. You want more, sooner rather than later. The office rental digs you had vs. the modest apt and original PC setup had me wrong in my original assumption. My bad. However, there is nothing wrong with thinking big. That's how virtually everyone who does make it "big" thinks. Levels of risk, stress, perceived quality of life...all decisions made based on what our mental/emotional make-ups can tolerate.

This is my last post in this thread. But I will be on the bleachers with my hot dog and beer, cheering you on. Best of luck to you.


speaking of long call, I have told a few people they should look at TST as an option trade, here are some rough payoff visualizations with TST.

The first chart could also be displayed as as TSTs profit loss payout.


.
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  #235 (permalink)
Market Wizard
Quebec
 
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Big Mike View Post
TST is for traders that need to hone their risk and discipline skills. TST is also for traders who are underfunded. TST is not for existing profitable traders with their own money, in my opinion. Why some people insist on thinking that TST is for everyone makes no sense to me...

Mike

Another possibilty is that passing a combine maybe used as a marketing tool. Just pretend you are a vendor and successfully passed a combine with your strategy would it not add some credibility to your offering?

 
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  #236 (permalink)
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SteveH View Post
However, if one proves to be successful,

Your comparison was well done and well received (by me anyway), but the above quoted statement, which is a big IF, immediately rules out 90% of the population you might be addressing, as you have addressed only upside potential, not downside risk.

For someone who has found their way and is successful like you Steve, and who has a large amount of risk capital, your analysis is absolutely applicable and I wouldn't see it any other way. For the other 90%, the story usually goes something like this:

(1) Sim trade for 4-6 months, reset the sim on those really bad days. Make or lose a little money, have a few good days/weeks
(2) Open a $10,000 account, with no other traders/managers/authority figures to be accountable to
(3) (a) Slow bleed to $2,000 over 12 months (b) Big blowout to nothing in 3 months
(4) Repeat this process for many months or years.

I have no empirical data, but I am increasingly believing that #4 happens because most individual traders have no one to be accountable to. A very few may not need this, but most do. And I do not think it is as effective if the person that holds the trader accountable to is a spouse, friend, or futures.io (formerly BMT) member, etc. It needs to be someone who can actually pull the plug and set the rules. Your girlfriend, wife, brother, friend, or futures.io (formerly BMT) member can not enforce a daily/weekly loss limit; they can not force you to stop trading for the day; and if you really wanted to, you could actually stretch the truth about your results so as to save face and not receive an ear-full about it ( (not that anyone here would I'm sure).

An external entity who has access to your trading in real time and who can pull the plug, give you a phone call and talk about what you're doing today, and essentially sets boundaries on your behavior, is something that 90% of us sorely need. For those who have matured to the point where they can self-manage, accountability is not necessary, but for the rest, boundaries, discipline, and accountability need to be forced by someone else. This could be a broker, a prop firm, or something else, but relying on ourselves to be disciplined and set rules when we have not matured as traders is like sending a kid into a free-for-all candy store and telling him not to eat anything because he needs to eat his veggies at dinner first--it just ain't gonna happen.

So, looking at downside risk, I think any avenue which enforces accountability and limits losses, while the trader matures and develops his methodology, is a very smart way to go, compared to the norm. Forget the upside "losses" (which are still gains), until the gains actually happen. At that point (like you Steve, a 10-year self-managed veteran), a trader is mature, understands risk, is self-disciplined, and can take the reins for himself.

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  #237 (permalink)
Market Wizard
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josh View Post
Your comparison was well done and well received (by me anyway), but the above quoted statement, which is a big IF, immediately rules out 90% of the population you might be addressing, as you have addressed only upside potential, not downside risk.

For someone who has found their way and is successful like you Steve, and who has a large amount of risk capital, your analysis is absolutely applicable and I wouldn't see it any other way. For the other 90%, the story usually goes something like this:

(1) Sim trade for 4-6 months, reset the sim on those really bad days. Make or lose a little money, have a few good days/weeks
(2) Open a $10,000 account, with no other traders/managers/authority figures to be accountable to
(3) (a) Slow bleed to $2,000 over 12 months (b) Big blowout to nothing in 3 months
(4) Repeat this process for many months or years.

I have no empirical data, but I am increasingly believing that #4 happens because most individual traders have no one to be accountable to. A very few may not need this, but most do. And I do not think it is as effective if the person that holds the trader accountable to is a spouse, friend, or futures.io (formerly BMT) member, etc. It needs to be someone who can actually pull the plug and set the rules. Your girlfriend, wife, brother, friend, or futures.io (formerly BMT) member can not enforce a daily/weekly loss limit; they can not force you to stop trading for the day; and if you really wanted to, you could actually stretch the truth about your results so as to save face and not receive an ear-full about it ( (not that anyone here would I'm sure).

An external entity who has access to your trading in real time and who can pull the plug, give you a phone call and talk about what you're doing today, and essentially sets boundaries on your behavior, is something that 90% of us sorely need. For those who have matured to the point where they can self-manage, accountability is not necessary, but for the rest, boundaries, discipline, and accountability need to be forced by someone else. This could be a broker, a prop firm, or something else, but relying on ourselves to be disciplined and set rules when we have not matured as traders is like sending a kid into a free-for-all candy store and telling him not to eat anything because he needs to eat his veggies at dinner first--it just ain't gonna happen.

So, looking at downside risk, I think any avenue which enforces accountability and limits losses, while the trader matures and develops his methodology, is a very smart way to go, compared to the norm. Forget the upside "losses" (which are still gains), until the gains actually happen. At that point (like you Steve, a 10-year self-managed veteran), a trader is mature, understands risk, is self-disciplined, and can take the reins for himself.

Good post..and one which I wish I had read a few years ago . It may have saved me from some truly foolish losses..where I found myself engaging in highly compulsive and destructive trading behavior...that probably cost me almost $100,000.00.
Most people have no clue about the emotions they can face. One can find themselves transformed from a reasonably intelligent and responsible person into a crazed degenerate Vegas gambler.

Now that I know that part of me exists, I have to always be vigilant that I never relapse into that behavior again..

Failure is not an option
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  #238 (permalink)
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awesome stuff both Josh and Steve!

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


DarkPoolTrading View Post
Hey it7,

Im an avid price action fan but am very much a student and battle to see what more experienced PA traders like yourself see on the charts sometimes. I've marked up your chart from yesterday with what I see. I see a horizontal SR line, and two potential long trades when price pulls back to that point. The last trade you took is one I would have taken. But I would not have been able to see the first 3.

If you dont mind, please could you explain what you were seeing to make you enter those trades. What was your reasoning. (it's not really important that the first was a loser and the 2nd was a scratch. The point is that you're seeing opportunities in the price action, you're taking the trades, and keeping your risk low).

Sorry for clogging up your combine journal with this. Just looking to grow and learn as a PA trader.

Many thanks.


Glad to help; I don't feel like there's any clogging at all.

If you're familiar with the OS (opening swing) term... which is pretty self explanatory....

First trade - I took the first mini pullback to the opening swing high, looking for continuation upward.

Second trade - A small pullback to that same area (opening swing high) so now I expect us to break through the OS low.

Third trade - After a failed attempt up and now movement below the OS... I expect stops to be triggered and sellers to step in. This did not happen. So the third trade becomes what I call a breakout failure. Price should have done one thing breaking to new lows there, but it just stalled and reversed hard. So I want to be long and take advantage of the now trapped shorts as they'll have to buy to exit their losing positions and send my trade into profits.

Hope that helps.

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



SteveH View Post
Just out of curiosity, I ran some numbers...


This is my last post in this thread. But I will be on the bleachers with my hot dog and beer, cheering you on. Best of luck to you.

Thanks for the comments as usual. Your analysis is spot on. I tried to PM you, but it appears this isn't possible based on your settings or something. Anyways, I still stand by what I originally said.... Trading your own account AND a TST funded account is not a mutually exclusive deal you can do both and make both the incomes you compared as "either or" in your example.

I'm not so sure you actually understand who I am as a person, and what exactly my aspirations are (this is what I was going to PM you about).

I do hope that isn't your last post. I would rather have guys like you posting that really get down to business and fearlessly question everything I do than almost anything else.


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