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Please try to understand something here: a positive expectancy is a positive expectancy. I don't care if it's 10 ticks per trade or 0.1 ticks per trade. Positive is positive! If I made 1000 trades with an average of 0.5 ticks profit per trade, including commissions, I've made money. That's just simple math. Period. The end.
Do I want to improve my expectancy? OF COURSE!!! Am I going to jump into live trading with a +0.5 tick expectancy after 55 trades on a simulator? HELL NO!!!
But if I do make 1000+ trades on the simulator, and +0.5 ticks profit per trade turns out to be consistent (i.e. "proven"), I can work with that. That is a profitable system. Obviously, it's not as good as what you all are doing but it is profitable.
Again, I believe I can do much better than +0.5 ticks per trade. But it will not be better than +4 ticks (before commissions), at least not for a long while. That is because I am trying to emulate Mack's trading style (priceactiontradingsystem.com) and his target is always 4 ticks. Combined with his very well developed ability to read the price action, his tiny 4-tick scalper's target enables him to have about a 90% win/loss ratio. Now, he also lets a couple contracts run sometimes. I've seen videos of him taking a trade with 10 contracts, scalping out on 8 of them at +4 ticks, then letting 2 contracts run to try to grab more profit. However for me personally, I'm in "phase 1" of my training. For now I'm only trading 1 contract and always scalping out at +4 ticks. I have to master scalping before I can move on to runners.
You all apparently have larger targets and that's fine. I'm sticking with the 4-tick scalper's target because I believe that is my best chance of taking a profit on most trades, even if I don't read the price action too well.
-bbdsan
Can you help answer these questions from other members on NexusFi?
Same here, only trying to lead you down a better path. Did not want to bluntly say that what you are doing will fail, but "IT WILL" You bought a system that in the grand scheme of things you could have gotten free with some research and self study. I thought you might have honestly wanted to learn, but you don't seem willing to open your mind to see a better way. So with that like BIgMike I will say good luck.... as the wings have already fallen off your plane.
Hi Mike, I don't understand exactly how I did it but it seems I have managed to offend you. I certainly wasn't trying to do that and I regret if what I wrote upset you. I really do not think that I know better than you. I'm just a newbie trying to learn PA on a simulator. You're trading live, apparently doing very well.
I can see how my comments about my (and Mack's) 4-tick target may have sounded like I thought I knew better than you. That was not my intention and I really regret it if that's how it was perceived. I wasn't trying to tell you or anyone else how to trade. I just believe that we all have to figure out what works best for ourselves. I am aware that lots of traders have larger targets than 4 ticks. That's awesome and I'm glad you've found something that works really well for you. My mileage varies. Reading the PA is really difficult for me, so I need the easier 4-tick target. It works well for me while I am still in my "price action infancy". That's all I was trying to say.
As far as the whole positive expectancy thing, I regret the tone of my comments. I got a little triggered after what I perceived as a lot of negative feedback here. I was just trying to explain my understanding of positive expectancy but I guess I have it wrong. I was thinking of it kind of like a batting average. I was thinking that if my average trade yields a profit, then that would be a successful system in the sense that, on average, I would be making profits instead of incurring losses. I was thinking that if I could repeat my 55-trade-$311-profit-in-one-week performance consistently, week after week, that I would be happy with that, especially considering I could scale up to multiple contracts. If you are moved to continue helping me, would you be willing to explain the error in my thinking above, rather than using blanket statements like, "Your argument makes no sense."?
In my post, I never said that I can't increase my expectancy. Quite the opposite. I am absolutely trying to increase my expectancy. That's why I'm on the simulator for hours every day. That's why I post charts showing the trades I made, winners and losers.
I have chosen to spend many hours here on your site, instead of precious time on the simulator. I was hoping for some support, as in comments on the charts and trades I've posted, some insight into how I can read the price action better. What I've gotten is comments like, "live trading will eat you alive", "you will not survive", and ambiguous suggestions like "you may need to re-evaluate what you are doing", "you are headed down the wrong path" and, "I could share with you about your current system in terms of it's weaknesses. But I think it's best that you figure some of them out for yourself."
I have also put myself out there in this journal, openly and honestly exposing the hard time I was having. Even on the simulator I was having blowout days! Then, as I practiced and learned I started to show improvement. I wrote about having a $60 loss one week and then a $311 profit the next. I was trying to celebrate my progress and what I got here was a whole lot of "that's not good enough."
And now, if you'll excuse me, I have a date with Ninja Trader.
Whew, no new drama for now. That's a relief. I've been hard at work on the simulator. I finished another week on replay.
4/7 -$89.00, 15 wins, 10 losses (I was experimenting with breakout-pullback entries. I didn't do well with them.)
4/8 -$272.94, 13 wins, 10 losses (Rough day! I kept trying to pick tops, several counter trend trades that lost.)
4/9 +$216.22, 10 wins, 3 losses (Better! Focused on what prices are doing, not what I think they'll do.)
4/10 +$407.36, 16 wins, 3 losses (Monster day! Little tricky at first, then I got several good scalps on a big down trend.)
4/11 +$337.74, 16 wins, 5 losses (Crappy start but I was able to turn it around nicely.)
Week of 4/7 +$599.38, 70 wins, 31 losses (all trades were 1 contract).
Despite what some may think of my results, I am pleased to have another winning week on the simulator under my belt. I got off to a bad start with those two losing days. But I know what I was doing wrong and it was a good learning experience.
For anyone who is curious, my standard risk/reward ratio is 2 to 1. That is, my stop is 8 ticks while my target is 4 ticks. Sometimes I move my stop a tick or two closer. Sometimes I will bail on a position before my target or stop is hit based on the price action. It may seem strange to have a stop larger than my target. It seemed wrong to me at first, too. Obviously I have to have a win/loss ratio better than 66.67% for such a strategy to be profitable. So far, I have managed to do that and stay profitable. I attribute that success to the ease with which I can judge the price action well enough to get 4 ticks. Even a novice like me can usually read it well enough to scalp out a measly 4 ticks.
I screwed myself on that last day. I actually started the day with a couple wins. Then I got tricked on an entry and the wheels fell off after that. At least I still finished the week with a profit.
Lately I have also been trading live data on the simulator. I'm not waking up early enough to trade the whole session but I've been able to get a few trades in:
It's annoying that I can't "fast forward" the PA like I can with replay data. But I figure it's good to get some practice in this manner. I was somewhat satisfied with the results. I know I can do better and so I keep practicing, but at least I made money instead of losing it.
I'm feeling more comfortable with the price action and I've learned to focus better on what price is doing *right now*. My most common mistake has been failing to draw in my short-term trend lines, the result being a counter-trend trade before the short-term trend has broken and pushed for a new extreme. Range days are the toughest for me. On a good trend day I do better, but still occasionally make the mistake of taking a 1st entry.
4/28/14 doesn't really count because I restarted the day on the simulator. I made some mistakes early on in the session and my psychology got the better of me. I basically started goofing off, not drawing any trend lines, not waiting for entry setups, trading by "feel". It was an absolute mess so I wiped the slate clean and restarted the day.
On one hand I think this is cheating. On the other hand it was a useful exercise to go back and re-trade the day. I drew my trend lines and waited for the proper entry setups. Regardless of what you call it, it happened and I can't go back to change what I did. However, I could change what I would do from that point forward.
For this next week I focused on a goal of trying to make $100 and then "quitting" for the day. I like this idea because ultimately, I want to trade just a couple hours each day. If I can consistently make $100 a day trading one contract, then I can increase my lot size and make more. It might not be the best way but I wanted to experiment with the idea on the simulator. I also did not allow any more restarts.
5/5/14 +$32.20, 4 wins, 1 loss (I was up $148.26 but then my last trade was a 9 tick loser)
5/6/14 +$110.84, 7 wins, 3 losses
5/7/14 +$139.32, 3 wins, 0 losses (finished my trading in just under 60 minutes)
5/8/14 +$62.58, 5 wins, 2 losses (I was down about $80, fought my way back and quit)
5/9/14 -$71.28, 8 wins, 4 losses (tough day, I was down a lot more but I actually made a decent comeback)
Week of 5/5 +$273.66, 27 wins, 10 losses
That's it for now. I'll continue practicing on replay data although I have been trading a little live data recently (demo account). I'm itching to try out my developing skills in the real world, but worried I'll get spanked, too. I've funded a micro-sized account ($600) that should be ready in about a week. It's enough to trade one contract only, but not enough to hurt me if I blow it out. If I lose it all it would just be like a bad night on the poker table. Plus you need at least $400 to day trade 1 contract so I don't think I actually would be able to blow it out, even if I tried.
As mentioned in my previous post, my latest strategy is to go for $100 profit (trading 1 contract) then "quit" for the day. Ideally that equates to 3 wins, 0 losses and $139.32 in profits (after commissions). One of the nice things about this strategy is that I often finish my trading early in the day. Obviously I won't bat 3 and 0 every day but I've been able to do it a few times recently. If I do have a loss (or two) then I keep trading until I get back up over $100 profit (or at least breakeven). Here are my latest results, with screenshots:
5/12/14: +$139.32, 3 wins, 0 losses
5/13/14: +$139.32, 3 wins, 0 losses
5/14/14: +$140.64, 5 wins, 1 loss
5/15/14: +$144.70, 4 wins, 1 loss
I'm pleased with how everything is going these days. I'm learning a lot, just trading on the simulator then reviewing my trades at the end of the day and watching Mack's "chart lesson" on YouTube. I like trading the early morning hours so much better than the late morning and afternoon. It just seems like the price action is a lot more predictable, and you get more movement.
Reading the PA is really difficult for me, so I need the easier 4-tick target. It works well for me while I am still in my "