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The Pandawarrior Chronicles II
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The Pandawarrior Chronicles II

  #91 (permalink)
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Some Changes

First a couple of housekeeping items;

1. Someone asked me the other day what I would do if I won the combine from the journal contest. Short answer is: Trade it. Otherwise why bother. With that combine I would be looking to maximize the size potential.

2. I have not looked for a swing entry since the first once I mentioned in this thread. I found it boring at least for now. I like the movement intra day and look forward to each new trading session. I did not look forward to waiting a few days for an entry on the swing charts. And I completely forgot to check my positions each day. So no more swing trading for me at least for now.

Now the changes:

But first some history.

I spent a lot of time just trying to figure out how the market moves. I finally settled down and just decided to use the original style of market context tools and methods I learned originally back when I first started in the markets. They make the most sense to me. However, I wasted a lot of time jumping around from style to style and method to method. Some of those methods were incredibly silly. I remember one thing a buddy and I designed, we called it the Funky Method....because it was neon purple and green on a black background. It was pure scalping and as most things go, it worked ok but required lots of trades a day....neither of us were disciplined enough to trade that way!

I eventually settled on the 800 tick chart because @VinceVirgil used it during a period of time when it allowed the entire day to be shown on the chart and yet was smaller in size than the 5M chart. I liked it and have used it ever since. I've played around with the settings on the moving averages a bit, changed the colors when I got bored and for the most part, have really settled into the style and method I've been developing for myself over the last couple of years.

As time has gone on, I find I want to trade less and less each day in terms of the number of trade sequences I take. The less I trade, the better my PnL curve looks. Further, I've discovered a few things about myself these last couple of weeks. While the volatility was very quiet, I yearned for the days of high volatility to return. The slowness bored me and often times lured me into stupid behavior. It still does but not near as much as before. Now that the volatility is back, I find something odd happening, I do not like the uncertainty of where a run might end up....in other words, I prefer more methodical profit taking.....whether that's at a fixed target or its a fib expansion or a market structure level....I would rather take profit at some sort of logical place than let an open ended trade just run. Call it a weakness or whatever, its who I am currently.

It comes down to this: I am ok with the uncertainty of each trade being a winner or loser. I am not currently emotionally ok with the uncertainty of an open profit trade of say 70-80 ticks turning into a break even or worse a small loser. Especially when I can see a logical place to take profit in the 70-80 neighborhood.

Of course there are $5 days that can make your week or month. BUT at this point in my career and in my emotional development, I would rather be logical and make a single or a double every day instead of striking out a lot and then hit a home run now and then. The baseball metaphor isn't perfect but it works.

All this falls into the category of "know thyself".

As a trader, I think I finally know myself. I like the intra day action, I like a balance between known risk and perceived profit potential. I like closing out a trade having executed it according to some sort of plan.....I do not like relying on luck or an outlier to make my day, week or month.

Using my hard won knowledge, I've determined that around 3X risk is about where I need to be looking. On a "normal" day, this works well, is within the confines of "normal" market ranges and does not require outliers to achieve.

The objective is to do this and take the fewest trades possible each day while still giving myself the opportunity to maximize the opportunities presented.

So in the interest of fulfilling these objectives, I've made some further changes:

1. I have reduced the number of charts I use....I will no longer use the 800 tick chart. I am moving to the 5 minute as my smallest time frame. I'll have a 15M, a 60M and a daily of course. I will take trades on the 5M chart exclusively.

2. I have implemented a profit grid (PG)system. To complicated to go into here, but I have tested and tested over the last year or two and it works. I will be taking profit methodically within the confines of this grid. On outlier days, this looks childish, on normal days it looks brilliant.

3. I will enter each trade with my smallest size. Targets will be the PG levels and no more. If price runs out past those levels, then they run....so be it. This will help me be more consistent with trading the plan.

4. I will add to each trade ONLY if the trade is with trend and then only if there is significant room between the second entry and the PG level to obtain at least a 2X profit on the second entry price.

5. I will only add to the trade IF a legitimate second entry presents itself.

6. I will no longer use a BE stop unless price is at least 20 ticks away from my entry AND it has retested my entry at least once. These BE stops have been a horrible practice. They have saved me some losers to be sure....but they have prevented far more winners than losers. I will move my combined stop to BE once a second position has been entered as soon as possible. The goal here is to keep the combined entry at the same dollar risk as the first entry.

7. I will not trail stops any longer during the early stages of the trade. I call this the kill zone....some profit but not enough room to eliminate the noise and still have a decent profit locked in....Once price is closer to my target zones, I will trail but still give it room.....this is the only way I know to capture the bulk of a profit objective. Trailing to soon ALWAYS results in lost opportunity.

8. I do MUCH better on a weekly basis IF I walk away when I've had a good winner. I've reviewed my journals, my threads and my private blog....all confirm this....get a nice winner early, quit for the day....keep trading and I normally give most if not all of it back. I demonstrated that this week. Again, this falls in to the "know thyself" category. So I will no longer sit at the charts all day UNLESS I have not traded based on my rules. As a professional trader, I either trade my rules when they present or no trades at all.....and that can happen early or it could take a couple of hours depending on how the price action is setting up.

9. ALL stop losses are sunk costs. Treat them as such. R:R doesn't exist once the trade is live.

10. Counter trend trades are OK, small size. No adds, first available PG level, get out. At least 1X risk to consider. No exceptions. Prefer 2X if possible.

11. I will use the widest stop possible within my daily loss limit on the initial entry....this will be tightened up once price has met my trail criteria. Namely a second entry. That's about it....maybe BE once a test of the entry has been made and price is my favor quite a bit....otherwise. Just leave it alone.

What I have not changed:

1. My market context definitions.
2. My entry rules.
3. My market directional filters. They work....and are subjective as are most things.
4. My daily loss limit.
5. My weekly profit objective.
6. My money management rules.

And now the why:

1. I have noticed over time (I'm dense I know) that I often enter at the bottom of a move.....I get this right A LOT. Only to find I broke even on the day or minimized the profit potential by trailing to aggressively. Nine times out of ten, setting the stop and profit objective and walking away would have been the better course of action.

All my attempts to manage, think about or otherwise interfere with the trade resulted in sub optimum performance. ALL OF IT! Nothing I do outside of finding the lowest risk place to enter and logical place to exit is worth a damn. None of it. in the year and a half I have been mostly profitable, nothing has limited or reduced my profits more than trade management.

2. I am tired of sitting in a trade wondering if I should tighten my stop or not. Tired of wondering if this trade will run 200 ticks or not.

3. I'm tired of taking so many darn trades every day....and I really only take 5 or 6 serious trade attempts every day...sometimes more but usually only around 5-6. Sometimes it takes a couple of attempts to get it right...but this is a symptom of trying to be exactly right about the timing....which I am almost never exactly right.

4. But mostly I am tired of doing a review at the end of the day and seeing that my profit objectives have been obtained without me. Tired of knowing that EVERYTHING I do in between entry and exit is simply random guesswork.

Long post, but its been a long time coming. I know I can work within the confines of these guidelines. Each one has been something I have thought about at length or has been hovering around the shadows of my consciousnesses for a long time.

Here's to hard fought change......

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
 
  #92 (permalink)
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PandaWarrior View Post
All my attempts to manage, think about or otherwise interfere with the trade resulted in sub optimum performance. ALL OF IT! Nothing I do outside of finding the lowest risk place to enter and logical place to exit is worth a damn. None of it. in the year and a half I have been mostly profitable, nothing has limited or reduced my profits more than trade management.

Wonderfully said. I still struggle with this myself.

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  #93 (permalink)
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Trading



PandaWarrior View Post
First a couple of housekeeping items;

1. Someone asked me the other day what I would do if I won the combine from the journal contest. Short answer is: Trade it. Otherwise why bother. With that combine I would be looking to maximize the size potential.

2. I have not looked for a swing entry since the first once I mentioned in this thread. I found it boring at least for now. I like the movement intra day and look forward to each new trading session. I did not look forward to waiting a few days for an entry on the swing charts. And I completely forgot to check my positions each day. So no more swing trading for me at least for now.

Now the changes:

But first some history.

I spent a lot of time just trying to figure out how the market moves. I finally settled down and just decided to use the original style of market context tools and methods I learned originally back when I first started in the markets. They make the most sense to me. However, I wasted a lot of time jumping around from style to style and method to method. Some of those methods were incredibly silly. I remember one thing a buddy and I designed, we called it the Funky Method....because it was neon purple and green on a black background. It was pure scalping and as most things go, it worked ok but required lots of trades a day....neither of us were disciplined enough to trade that way!

I eventually settled on the 800 tick chart because @VinceVirgil used it during a period of time when it allowed the entire day to be shown on the chart and yet was smaller in size than the 5M chart. I liked it and have used it ever since. I've played around with the settings on the moving averages a bit, changed the colors when I got bored and for the most part, have really settled into the style and method I've been developing for myself over the last couple of years.

As time has gone on, I find I want to trade less and less each day in terms of the number of trade sequences I take. The less I trade, the better my PnL curve looks. Further, I've discovered a few things about myself these last couple of weeks. While the volatility was very quiet, I yearned for the days of high volatility to return. The slowness bored me and often times lured me into stupid behavior. It still does but not near as much as before. Now that the volatility is back, I find something odd happening, I do not like the uncertainty of where a run might end up....in other words, I prefer more methodical profit taking.....whether that's at a fixed target or its a fib expansion or a market structure level....I would rather take profit at some sort of logical place than let an open ended trade just run. Call it a weakness or whatever, its who I am currently.

It comes down to this: I am ok with the uncertainty of each trade being a winner or loser. I am not currently emotionally ok with the uncertainty of an open profit trade of say 70-80 ticks turning into a break even or worse a small loser. Especially when I can see a logical place to take profit in the 70-80 neighborhood.

Of course there are $5 days that can make your week or month. BUT at this point in my career and in my emotional development, I would rather be logical and make a single or a double every day instead of striking out a lot and then hit a home run now and then. The baseball metaphor isn't perfect but it works.

All this falls into the category of "know thyself".

As a trader, I think I finally know myself. I like the intra day action, I like a balance between known risk and perceived profit potential. I like closing out a trade having executed it according to some sort of plan.....I do not like relying on luck or an outlier to make my day, week or month.

Using my hard won knowledge, I've determined that around 3X risk is about where I need to be looking. On a "normal" day, this works well, is within the confines of "normal" market ranges and does not require outliers to achieve.

The objective is to do this and take the fewest trades possible each day while still giving myself the opportunity to maximize the opportunities presented.

So in the interest of fulfilling these objectives, I've made some further changes:

1. I have reduced the number of charts I use....I will no longer use the 800 tick chart. I am moving to the 5 minute as my smallest time frame. I'll have a 15M, a 60M and a daily of course. I will take trades on the 5M chart exclusively.

2. I have implemented a profit grid (PG)system. To complicated to go into here, but I have tested and tested over the last year or two and it works. I will be taking profit methodically within the confines of this grid. On outlier days, this looks childish, on normal days it looks brilliant.

3. I will enter each trade with my smallest size. Targets will be the PG levels and no more. If price runs out past those levels, then they run....so be it. This will help me be more consistent with trading the plan.

4. I will add to each trade ONLY if the trade is with trend and then only if there is significant room between the second entry and the PG level to obtain at least a 2X profit on the second entry price.

5. I will only add to the trade IF a legitimate second entry presents itself.

6. I will no longer use a BE stop unless price is at least 20 ticks away from my entry AND it has retested my entry at least once. These BE stops have been a horrible practice. They have saved me some losers to be sure....but they have prevented far more winners than losers. I will move my combined stop to BE once a second position has been entered as soon as possible. The goal here is to keep the combined entry at the same dollar risk as the first entry.

7. I will not trail stops any longer during the early stages of the trade. I call this the kill zone....some profit but not enough room to eliminate the noise and still have a decent profit locked in....Once price is closer to my target zones, I will trail but still give it room.....this is the only way I know to capture the bulk of a profit objective. Trailing to soon ALWAYS results in lost opportunity.

8. I do MUCH better on a weekly basis IF I walk away when I've had a good winner. I've reviewed my journals, my threads and my private blog....all confirm this....get a nice winner early, quit for the day....keep trading and I normally give most if not all of it back. I demonstrated that this week. Again, this falls in to the "know thyself" category. So I will no longer sit at the charts all day UNLESS I have not traded based on my rules. As a professional trader, I either trade my rules when they present or no trades at all.....and that can happen early or it could take a couple of hours depending on how the price action is setting up.

9. ALL stop losses are sunk costs. Treat them as such. R:R doesn't exist once the trade is live.

10. Counter trend trades are OK, small size. No adds, first available PG level, get out. At least 1X risk to consider. No exceptions. Prefer 2X if possible.

11. I will use the widest stop possible within my daily loss limit on the initial entry....this will be tightened up once price has met my trail criteria. Namely a second entry. That's about it....maybe BE once a test of the entry has been made and price is my favor quite a bit....otherwise. Just leave it alone.

What I have not changed:

1. My market context definitions.
2. My entry rules.
3. My market directional filters. They work....and are subjective as are most things.
4. My daily loss limit.
5. My weekly profit objective.
6. My money management rules.

And now the why:

1. I have noticed over time (I'm dense I know) that I often enter at the bottom of a move.....I get this right A LOT. Only to find I broke even on the day or minimized the profit potential by trailing to aggressively. Nine times out of ten, setting the stop and profit objective and walking away would have been the better course of action.

All my attempts to manage, think about or otherwise interfere with the trade resulted in sub optimum performance. ALL OF IT! Nothing I do outside of finding the lowest risk place to enter and logical place to exit is worth a damn. None of it. in the year and a half I have been mostly profitable, nothing has limited or reduced my profits more than trade management.

2. I am tired of sitting in a trade wondering if I should tighten my stop or not. Tired of wondering if this trade will run 200 ticks or not.

3. I'm tired of taking so many darn trades every day....and I really only take 5 or 6 serious trade attempts every day...sometimes more but usually only around 5-6. Sometimes it takes a couple of attempts to get it right...but this is a symptom of trying to be exactly right about the timing....which I am almost never exactly right.

4. But mostly I am tired of doing a review at the end of the day and seeing that my profit objectives have been obtained without me. Tired of knowing that EVERYTHING I do in between entry and exit is simply random guesswork.

Long post, but its been a long time coming. I know I can work within the confines of these guidelines. Each one has been something I have thought about at length or has been hovering around the shadows of my consciousnesses for a long time.

Here's to hard fought change......

Now we are talking. CONGRATULATION. I wonder you seemed to have most of the things under control but why muck the trades up via trailing stop, B/E risk management strategy and host of other things you talked about in this post.I was made aware some of the isues you mentioned in this post in my trading but it just did not matter till it mattered in time. I guess that's why it's said we each have to travel our own path to reach our destiny.



My posts are not meant to give financial advice neither do they imply that my method is special. "THIS IS WHAT I COULD BE IF I HAD A TOTALLY CARE FREE STATE OF MIND DURING TRADING" Mark Douglas.

Last edited by mfbreakout; October 17th, 2014 at 10:13 PM.
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  #94 (permalink)
Hi Mom!
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Awesome post dude, I'm struggling with some of those same issues myself.

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  #95 (permalink)
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That post hit it right on the money. I can relate to a lot of those myself.

The single best thing I've done in my trading has been to not manage my trades. I've still not decided whether or not to scale in/out of my trades. But one thing is for sure. I'll never touch stop or target(s) after the order is placed

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  #96 (permalink)
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Great post PW. A lot of wisdom in there.


PandaWarrior View Post
....I will no longer use the 800 tick chart.

Question: I notice you use trend lines for context and structure. In dropping the 800 tick chart have you considered what that will do to your trend line analysis? I find that tick charts work well with trend lines due to the time compression.

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  #97 (permalink)
Elite Member
In the heat
 
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PandaWarrior's Avatar
 
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Tap In View Post
Great post PW. A lot of wisdom in there.



Question: I notice you use trend lines for context and structure. In dropping the 800 tick chart have you considered what that will do to your trend line analysis? I find that tick charts work well with trend lines due to the time compression.

I have....and my conclusion is that trend lines work until they don't. I have a couple of criteria I use for trend lines. Those won't change with the chart change. And there will be fewer of them using the different time frame which is something I like.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #98 (permalink)
Elite Member
In the heat
 
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PandaWarrior's Avatar
 
Posts: 3,155 since Mar 2010
Thanks: 6,306 given, 13,250 received

Just discovered Evernote....I think I might like this a lot.....I'll be journalling in Evernote this next week on a trial basis. I've already begun revising my trading plan with it and so far so good. I even clipped a post from this thread and made it part of the notebook....super easy and very useful.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #99 (permalink)
Trading for Fun
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"....but this is a symptom of trying to be exactly right about the timing....which I am almost never exactly right."
________________________________________________________________________________________________

I doubt that many of us are often exactly right on timing. Which leads one to speculate that we could, on most trades, pick our optimal entry point -- then wait for the trade to take some amount of heat -- then actually enter. We'd win more ticks on the winners -- and lose less on the stop-outs. It's likely that these extra ticks would, over time, end up dwarfing the missed profit on rare entries that we actually timed perfectly.

Of course, the amount of heat that we should let the trade experience before actually entering, would depend on just how poor we are at timing

Seriously though, that was a nice post Panda. Thank You.

Peace,
Paige

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  #100 (permalink)
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PandaWarrior View Post
Just discovered Evernote....I think I might like this a lot.....I'll be journalling in Evernote this next week on a trial basis. I've already begun revising my trading plan with it and so far so good. I even clipped a post from this thread and made it part of the notebook....super easy and very useful.

Evernote is awesome! I have been using it for a couple of years. This is where I keep my personal journal.

Robert

nosce te ipsum

You make your own opportunities in life.
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