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Trading Price Action On Renko Charts - Live Trades
No markup today..my brain hurts. I traded the YM and ended up down $178 including commissions. At one point, after about 5 trades, I was up $190 or so, and I should have stopped. I thought the MKT was in a TR, but it ended up being a broad bear channel. So, I ended up taking more 'countertrend' longs than I meant to take. I just couldn't switch my mindset fast enough.
I made several mistakes today - mostly all deviations from the plan:
1. Not taking profits - I had at least 3 trades that had +12 ticks, and I didn't take it. I scratched 2 and took a loss on one. This was a result of thinking about my PnL instead of trading correctly.
2. Taking trades not in the plan - 1 worked, but I mismanaged it because I wasn't sure where to exit. 2 didn't work, but both would have if 1) I had used the correct stop and 2) if I had been able to scale in.
3. Not thinking about scaling in - my plan calls for it so I should be considering it, even if I can't do it in the YM because it changes my thoughts on the probability of the trade. I had one trade that would have worked perfectly with an addon and a wide stop...instead, I got stopped out by 5 ticks or so for a large loss.
All-in-all, I think this plan is solid. I'm just costing myself money by being stupid and fighting myself sometimes. Interestingly, I've taken 24 trades in 3 days. All of them have gone at least 5 ticks in my favor (MFE). I'll experiment with the ES sometime and see if the same is true for 4 ticks Very Happy
I think I will also size up to the 6 renko next time I trade the YM. I'm wondering if there's a bit too much information on the chart still. I don't necessarily want to take all of the marginal entries that follow the rules; I'd rather just take 5 solid ones a day. The 6 renko doesn't seem to show as many of the smaller legs, so I think it will help me focus on the major moves more.
Once I have more data, I will think more about scaling in - e.g. what is better mathematically? Scaling in, or just using the tighter, correct stop? Scaling in adds extra complexity and risk, so if I can be right 60% of the time with 1:1 RR without it, I might just learn to take the hits and accept that some losers would have worked if I had scaled in. I also need more data about the PB levels. I've missed some decent trades waiting on the 66% level; but I've also found plenty of trades without trading the 33% levels. So, I might just stick with the 66% levels to keep it simple and also just accept that I'll miss strong moves sometimes by doing so. Currently undecided on both points.
Can you help answer these questions from other members on NexusFi?
Much better performance than yesterday. I realized that I had gotten a bit of tunnel vision lately, focusing too much on finding strong legs and not paying enough attention to context. I'm trying to correct that and be more patient. I missed a few decent trades today by doing that, but I also correctly passed on a few shorts, too.
I also realized that increasing my risk, even by a few dollars, bothers me. I think a gradual increase in size will be best. For forex, I plan to increase size 1K per entry each week that I trade well. I'll define "trade well" as 1) statistics - Am I performing well mathematically speaking? and 2) psychology - Do I feel comfortable? Am I thinking too much about the risk/winning/losing? Am I following the plan? I'll stick with the whatever size I'm on until 1 & 2 are both true. The idea here is to find my comfort zone and then gradually expand it until I hit a plateau. I'm trading much smaller than my capital allows, so I'm not thinking much about max risk per trade at this point (although I will have to once I reach a certain size).
This is why I switched back to FOREX. Focusing on PnL had become too big an issue with me, especially trying to tailor fit a strategy around trading the YM with one contract. I am now back to where I can trade appropriately in regards to both style and size. Focusing on PnL does absolutely nothing for my confidence or focus. I am actually digging having my charts and execution on two different platforms so I can minimize my trade window, and focus on actually trading well. Like you said, keeping your risk percentage under a psychologically distracting threshold seems to be key. Let the leverage grow along with your confidence. And trade more when you are trading better, and scale back when not so much. And keep things as simple and repeatable as possible, still struggling with that but getting better.
We are on similar paths my friend, welcome to the forum.
Thanks for the welcome! I may try turning off the Chart Trader in NT after I enter - see if that helps eliminate the PnL distraction. Thanks for the idea, good sir.
Your charts are similar to mine using better renko bars. I am also trading through FXCM at the moment, mainly trading Germany30 (DAX cash). It's been unbelievably volatile over the last week or so making it pretty much impossible.
I also spent a few weeks in Al Brooks' trading room in 2012. I like his 2nd attempt to retrace ideas.
My problem is getting hung up with risk/reward ratios. How do you deal with it? Do you have a fixed stop and target?
Thanks for stopping by my journal. I don't really have a default stop or target, but I generally try to get at least 10 ticks in forex so that commissions don't become too large compared to profit. I also like to get at least 1:1 R:R in a trade as well on my scalp portion. I'll exit with less if the trade isn't doing what I expected, and I won't usually take a trade if the market's going sideways in a tight trading range - 20 ticks or less.
Actual Risk
I use this concept sometimes when the market requires a large stop, and it might help you some in thinking about R:R. Actual risk is simply the number of ticks a trade went against you after entry, or the maximum size stop you would have needed to stay in the trade. If your initial stop is far away and a profit target seems unrealistic based on that initial stop, you can convert the initial profit target based on actual risk.
Example:
My trade yesterday. My initial stop was about 45 pips away, and I doubted I would be able to get 2x that. I thought even 1x that might not be realistic. But by bar 211-212, the trade was going my way, and I thought more down was likely. The trade only went against me 2 ticks, so my actual risk was 3 ticks (2+1 for the stop). I realized this early and had already scalped out for +12 at the 33% PB level. So, I actually did get 4x my AR on this trade.
Some people like this concept, and some don't. It's just a tool that may help you decide if the math is good on your trade in situations where the targets seem unobtainable based on the required stop size. You can choose any R:R based on the AR that you want, so that it makes sense with your method and personality.
Since I scalp mostly, I focus less on R:R and more on probability. In general, higher probability comes with higher risk and usually less reward left in the trade.
General example: say you're buying at support in a bear channel and you think the market is forming a bottom.
1) Lower probability, lower risk, higher R:R
You could buy a reversal bar using a tight stop, and if the trade works, you'll get a nice reward out of it. So, in this case, you have a good R:R, but the probability is low because it's still a bear channel and you're buying. You might be risking 10 ticks to make 40, for example.
2) Higher probability, higher risk, lower R:R
On the other hand, you could wait until the bulls get a strong breakout and then buy. That's higher probability because the bulls have now demonstrated some strength. Now that other people/computers see that, it's usually a good bet that any pullback will likely be bought (market will have a 2nd leg up). In this case, you would have to use a stop below the bottom of the breakout, which might be 30 ticks away. It's higher probability but more risk. And since the move has gone some distance, there is probably less reward left too. You might be risking 30 ticks now to make 30 ticks, for example. Your R:R is worse than the first example, but you have a higher chance of success as a tradeoff.
So, in my case as a scalper, I'm always going for option 2. On every trade, there are things that can increase or decrease the probability, of course.
For example, I try to lessen risk some by waiting for a strong first leg and then buying a pullback, looking for the 2nd move up (vs. buying the actual breakout at market). I will also scale in if the trade goes against me, as long as I think my premise is still valid. This gives me more options because I don't have to be perfect with my timing. As long as I'm in the general area of S/R, then I have a good chance of profit if I scale in with a wide stop. I try not to let the wide stops get hit, though. As soon as I think I'm wrong, I try to exit with the loss and look for the next setup.
I apologize for the length of the post. I wanted to bring up probability because it's so often overlooked in favor of R:R. But you really can't consider one without the other in my opinion. Most scalpers will have a high win rate and bad R:R compared to a swing trader, and most swing traders won't win as much, but they win much bigger than the scalper when they do (good R:R).
I hope that helps some. If you have any more questions, just let me know!
Thanks for your detailed reply. I can tell that you are a devotee of Al Brooks lol
The trouble is that as soon as you put the trade on, price can quite easily turn around and hit your stop loss without even looking back. That has happened to me a few times over the last 2 weeks.
I seem to remember Al would often talk about getting out for 2 points profit but then not concern himself too much with r:r. He quite happily set a 5 point stop on ES and get out at 2 points profit. I think I would lose my account if I did that.
I understand how you feel there. It took me over 2 years before I was willing to try it and even now, I'll still pass on great trades if the stop is too wide. I think one of the biggest challenges in trading is finding your risk tolerance and finding a way to trade that's comfortable for you. I'm still working on both of those...
A couple of decent trades today. Overall, the MKT is pretty marginal today, so I decided not to force it. I probably should have scalped exclusively today since the MKT has been in a 30-35 tick TR. But it's still profit, so I'm happy enough.
