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Papa's Trading Journal
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Papa's Trading Journal

  #401 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
Big Mike's Avatar
 
Posts: 46,240 since Jun 2009
Thanks: 29,352 given, 83,223 received


papa15 View Post
My account size is probably the driving factor. I try to set the initial stop to maintain a reasonable loss percentage of the account size, usually less than 1.5%. Big Mike has repeatedly stated that is not the most optimum way of setting stops; the stop should be placed where you know if price gets to, the trade is a clear failure (usually beyond a swing high or low). In my ideal world, that is where I want to get to, but until I can build the account size to the point my 1.5% stop is bigger than the swing points, I will keep doing it the way I am.

What I must change, is to accept the stop for what it is. It is the point I am out of the trade, no questions asked. Just get out. If I feel really strong about the trade, it only costs a commission to get back in.

I understand.

But... you will be in a position many times where the trade is "correct" or "right", you will get stopped out due to the 1.5% arbitrary placement, and then have a loss instead of a winner - thus wreaking havoc on your psyche and your wallet.

My advice is to not trade this way. If you want to trade oil, but can't afford to properly trade CL, then try trading the mini QM. It isn't perfect. But your stops would have the opportunity of being placed in a logical position instead of an arbitrary figure.

All just my opinion of course, everyone is different. I also don't want you to keep changing stuff, so take my post with a grain of salt.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

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  #402 (permalink)
Elite Member
In the heat
 
Futures Experience: None
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Favorite Futures: Energy
 
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Big Mike View Post
I understand.

But... you will be in a position many times where the trade is "correct" or "right", you will get stopped out due to the 1.5% arbitrary placement, and then have a loss instead of a winner - thus wreaking havoc on your psyche and your wallet.

My advice is to not trade this way. If you want to trade oil, but can't afford to properly trade CL, then try trading the mini QM. It isn't perfect. But your stops would have the opportunity of being placed in a logical position instead of an arbitrary figure.

All just my opinion of course, everyone is different. I also don't want you to keep changing stuff, so take my post with a grain of salt.

Mike

I am leaning more and more toward the swing placement of stops.....I can't tell you how many times my stop on a range bar was hit to the tick before going on to my original target. Most of the time, a 1-2 larger stop would have done it.....sometimes 4 but never more than 6.....so perhaps a 20 tick stop is the answer for me....Most of the time, the swing is within 20 ticks....I'll look at this over the next week or so and see if it would have benefited me to use the larger stop.

Simplicity is the ultimate sophistication, Leonardo da Vinci


Most people chose unhappiness over uncertainty, Tim Ferris
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  #403 (permalink)
Elite Member
Honolulu, Hawaii
 
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Platform: NinjaTrader
Broker/Data: ATC/TT, AMP/Zen-Fire, AMP/CQG
Favorite Futures: TF
 
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Posts: 2,547 since Jun 2010
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papa15 View Post
Using the 3 bar set up as the starting point for an entry, adding that for a long the price on the last bar must close above the moving average and the ergodic must be above its signal line, I marked up the attached chart showing potential entries. Using a 12 tick target and 15 tick stop, the total would have been very profitable.

I like this chart. It uses range bars instead of normal candlesticks, so easier to tell where to make entries. This particular chart was 8 range, but could have been 10 or 12 range just as easily. Only one moving average versus the previous 2. Only 1 ergodic versus previous 2. Only 1 chart versus 2. It is getting much closer to something I can wrap my mind around and focus on....

For info, I still limit the number of trades. I am currently using 4 as the number, so I would not take all the trades annotated on the chart.

I know you know all of what I am about to type here.....

The key w/ the stops is to strictly not give yourself an option to move the stop. I tell myself that losers move their stops. I am not a loser, so I will not move my stop (unless I can just go above the high by 1 or 2 more ticks).

Something I noticed from the outside watching you go through your different rules....

One thing I believe is that you will have trouble with this method mentioned above that unless you do proper back and forward testing. Back testing is great in my opinion on more mechanical systems. I realize a great many don't believe in SIM or backtesting, but to me, they are the only real test before going live and we don't have till eternity to test a system.

I have ready thousands of journals and blogs and threads about trading methods and I always am challenged to see people avoid backtesting and give up on a system quickly when the market dynamic changes. I have created probably 200 on my own either programmatically or manually.

My point with visual backtesting is that I think you need to go back in history (at least 1 year if you got time) and find the absolute worst ranging days. The days that kill accounts and EGO's. The days where you can clearly see where this method would blow up over and over again and sink your account.

From there, I simply see how can I survive this calamity. That is where rules are based.

I look at Mike's (Winfrey) method on the 5M charts and I guess I still don't quite get some of his rules. They are clearly stated, but for some reason, I come up with different entries... I would love to see a recording of his session and then verify his entries etc..

From my standpoint only, I suggest you may spend some more energy on how to do better visual backtesting and rules building before live testing or forward testing anything.

Simple is good right.. It is just w/ what you have just stated, that I see many days where you would get beat up some maybe...

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  #404 (permalink)
Elite Member
Wake Forest, NC
 
Futures Experience: Intermediate
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Favorite Futures: NQ
 
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Posts: 527 since Sep 2009
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Big Mike View Post
I understand.

But... you will be in a position many times where the trade is "correct" or "right", you will get stopped out due to the 1.5% arbitrary placement, and then have a loss instead of a winner - thus wreaking havoc on your psyche and your wallet.

My advice is to not trade this way. If you want to trade oil, but can't afford to properly trade CL, then try trading the mini QM. It isn't perfect. But your stops would have the opportunity of being placed in a logical position instead of an arbitrary figure.

All just my opinion of course, everyone is different. I also don't want you to keep changing stuff, so take my post with a grain of salt.

Mike

Mike
I have experienced exactly what you have stated; many times I have been right on the anticipated direction, entered the trade, suffered the stop and then saw the trade go on to my target. It does wreck havoc on you....and it causes you to "give the trade a little more room" next time and it works out. Then the next trade you "give it a little more room" but it does not come back....well give it a bit more...and so forth. The absolute worst thing that ever happened to me in trading was for a trade that hit the point of the stop (but I had moved the stop before price got there) and then that trade turned around and was a winner. It planted a bad seed deep within. There should be a universal truth that once a stop has been placed, it can't be touched. If it was good enough to be there in the first place, it should be honored.

I have in the past looked at QM, and I will again since you mention it. It has been a while and I am not exactly sure why I didn't like it back then. But it is worth another look.

I guess from a distance it appears I am in a constant state of flux and change, but really I don't think I am. My mental state is better than it has been in a very, very long time. I have much more confidence and trust in my trading than I have had in a long time. The two best things that have happened were you suggesting I work on the self-discipline issues (which has been a big, big part of my internal improvement) and talking to some other members of the forum and having the 3 bar setup explained to me. I fully understand there is not such thing as a holy grail (and I am not in pursuit of one) but just listening to the explanation of the 3 bar setup in plain English caused some scales to fall from my eyes. I believe it was the piece I have been missing. The written journals are a big help in themselves, but being able to talk back and forth has been tremendous.

Thanks again for putting this together and for taking the time to give feedback.

My focus is on:
1. Avoid the opening chop.
2. Honor stops
3. Ensure reward > risk on all trades
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  #405 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
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Posts: 46,240 since Jun 2009
Thanks: 29,352 given, 83,223 received

I want to add, that for the majority of my trades (trend continuation or fades) I have to wait for price to come to me, so my stop is within an acceptable risk value for me. In other words, I know where in the market (price) my stop needs to be, but I often need to wait for the market to come to me enough so it is a good risk-to-reward.

I usually place these trades several minutes ahead of time as limit orders and find they get filled often. Yes there is the risk the market won't stop, and it will hit my stop on the way to a reversal. But it happens rarely enough that I am profitable overall

So if 1.5% is important to you, then make it your max stop. Don't use it as a set-in-stone figure on where the stop goes to the market -- use it as an area where you will not place a trade until the proper stop can be set based on market movement/price action/swings, and it also is within your 1.5%.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

The following 4 users say Thank You to Big Mike for this post:
 
  #406 (permalink)
Site Administrator
Manta, Ecuador
 
Futures Experience: Advanced
Platform: My own custom solution
Favorite Futures: E-mini ES S&P 500
 
Big Mike's Avatar
 
Posts: 46,240 since Jun 2009
Thanks: 29,352 given, 83,223 received

It is hard. No system is perfect. It takes a lot of mental discipline. You will see trades fly 100 ticks without you because they never came up to your acceptable-risk entry price, etc.

But there are ways to cope. For instance, in this case if price doesn't pull back to my entry for a fade then it might quickly continue to a breakout trade past a prior swing, which is a whole new setup for me on a buy stop or sell stop (market) entry at the swing level.

You'll have to come up with your own methods to best match your personality, risk aversion, need to be "in it", etc.

QM has its own problems, primarily the spread. It can cost you 2-3 ticks on every entry over CL. But I think it is still better than trading CL with bad stops due to "size".

Another option altogether is to trade something like USO ETF, where you can control in a very precise way your position size, much more granually than futures, and it is essentially the same as CL. But you need a 25k account to get past the pattern day trader rules, and an equities broker like IB or Lightspeed.

Mike

Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.

Need help?
1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first.
2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses.
3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make.
4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance.
5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers.
6)
Help using the forum? Watch this video to learn general tips on using the site.

If you want
to support our community, become an Elite Member.

The following 3 users say Thank You to Big Mike for this post:
 
  #407 (permalink)
Elite Member
Wake Forest, NC
 
Futures Experience: Intermediate
Platform: Sierra Charts, Investor RT, Ninja Trader
Broker/Data: VanKar
Favorite Futures: NQ
 
papa15's Avatar
 
Posts: 527 since Sep 2009
Thanks: 586 given, 1,244 received


bluemele View Post
I know you know all of what I am about to type here.....

The key w/ the stops is to strictly not give yourself an option to move the stop. I tell myself that losers move their stops. I am not a loser, so I will not move my stop (unless I can just go above the high by 1 or 2 more ticks).

Something I noticed from the outside watching you go through your different rules....

One thing I believe is that you will have trouble with this method mentioned above that unless you do proper back and forward testing. Back testing is great in my opinion on more mechanical systems. I realize a great many don't believe in SIM or backtesting, but to me, they are the only real test before going live and we don't have till eternity to test a system.

I have ready thousands of journals and blogs and threads about trading methods and I always am challenged to see people avoid backtesting and give up on a system quickly when the market dynamic changes. I have created probably 200 on my own either programmatically or manually.

My point with visual backtesting is that I think you need to go back in history (at least 1 year if you got time) and find the absolute worst ranging days. The days that kill accounts and EGO's. The days where you can clearly see where this method would blow up over and over again and sink your account.

From there, I simply see how can I survive this calamity. That is where rules are based.

I look at Mike's (Winfrey) method on the 5M charts and I guess I still don't quite get some of his rules. They are clearly stated, but for some reason, I come up with different entries... I would love to see a recording of his session and then verify his entries etc..

From my standpoint only, I suggest you may spend some more energy on how to do better visual backtesting and rules building before live testing or forward testing anything.

Simple is good right.. It is just w/ what you have just stated, that I see many days where you would get beat up some maybe...

I have been doing some back testing and from what I have seen, it shows great promise. I will continue to test it with live data next week. Not sure if will be sim or cash, but does that really make a difference?

The key is living with my daily stop loss. If I know that if I lose this much, then I am done for the rest of the day and I stick to that, then it should be alright. Essentially, if I take 2 full stops, I reach my daily loss limit in cash. Here is the plan that I am following:

trade results
4 winners----48 ticks
3 winners/1 loser----23 ticks
2 winners/2 losers---(6) ticks
1 winner/2 losers---(24) ticks done for the day
0 winner/2 losers---(30) ticks done for the day


Where I need improvement is (1) holding on to reach the profit target. Many times, I cut the trade short if I see any hesitation at all. If only I could be so quick on the losers. (2) Cutting the losers before I reach the full stop. You know, strangely it is easier to recover from a small loss than a big one. I keep telling myself that, but for some reason in real life, I keep trying to prove it is not true.

My focus is on:
1. Avoid the opening chop.
2. Honor stops
3. Ensure reward > risk on all trades
The following 3 users say Thank You to papa15 for this post:
 
  #408 (permalink)
Elite Member
Wake Forest, NC
 
Futures Experience: Intermediate
Platform: Sierra Charts, Investor RT, Ninja Trader
Broker/Data: VanKar
Favorite Futures: NQ
 
papa15's Avatar
 
Posts: 527 since Sep 2009
Thanks: 586 given, 1,244 received


Big Mike View Post
I want to add, that for the majority of my trades (trend continuation or fades) I have to wait for price to come to me, so my stop is within an acceptable risk value for me. In other words, I know where in the market (price) my stop needs to be, but I often need to wait for the market to come to me enough so it is a good risk-to-reward.

I usually place these trades several minutes ahead of time as limit orders and find they get filled often. Yes there is the risk the market won't stop, and it will hit my stop on the way to a reversal. But it happens rarely enough that I am profitable overall

So if 1.5% is important to you, then make it your max stop. Don't use it as a set-in-stone figure on where the stop goes to the market -- use it as an area where you will not place a trade until the proper stop can be set based on market movement/price action/swings, and it also is within your 1.5%.

Mike

Mike
Trading oil on a time chart or a tick chart leads me to bigger stops. I tried the dual ergodic method on range charts, but could not make it work right. Once I talked to some folks and saw the 4 betterrenko chart setup that used the 3 bar entry method, I realized I saw a chart and setup that met my 1.5% criteria. The stop could be no less than the low of the first bar, which should be 12 ticks for a 4 betterrenko bar. I am not as familiar with those bars, but I am familiar with range bars. Using pretty much the same logic on an 8 range bar setup, the stop should not be more 16-18 ticks away. Those I can handle.

I agree with all you have said. Your advice is sound and appropriate. I only hope I can pay it forward.

My focus is on:
1. Avoid the opening chop.
2. Honor stops
3. Ensure reward > risk on all trades
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  #409 (permalink)
Trading Apprentice
houston united states
 
Futures Experience: None
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Favorite Futures: forex
 
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Posts: 12 since Apr 2011
Thanks: 140 given, 0 received

papa 15

papa what advice do you have for a person just starting out(paper trading).planning on eventually starting with $one thousand dollars capital for trading. can't afford expensive tracking programs. any recomendations?
thanks, rick


 
  #410 (permalink)
Elite Member
Wake Forest, NC
 
Futures Experience: Intermediate
Platform: Sierra Charts, Investor RT, Ninja Trader
Broker/Data: VanKar
Favorite Futures: NQ
 
papa15's Avatar
 
Posts: 527 since Sep 2009
Thanks: 586 given, 1,244 received



riley8842 View Post
papa what advice do you have for a person just starting out(paper trading).planning on eventually starting with $one thousand dollars capital for trading. can't afford expensive tracking programs. any recomendations?
thanks, rick


In all seriousness, don't start if all you have is $1000. If that is all you have to put into a trading account, then you really are not ready for live trading. I know that sounds a bit harsh but being under-capitalized at the beginning is a mistake a lot of traders make. You can not over fund a trading account.

I would suggest you paper trade the market, try various methods to see what feels right to you, and settle on that method/technique. Learn it backwards and forward. Ignore everything else. Paper trade exactly like you would cash. Be brutally honest with yourself. Once you are satisfied you are successful paper trading, then paper trade some more.

I will be the first to admit that paper trading is different than cash. If you really want to trade cash, and all you realistically can put in a trading account, your best choice would probably be FOREX using the micro accounts. I have never traded those and don't know much about them. All that said, you really should look for any sort of extra job you can and dedicate all earnings from that job into a trading account. I know a lot of brokers will open a futures account with around $2500 and they may even set you up for low day trading margins, but all they are doing is setting you up for failure. You really should determine what instrument you want to trade and fund the account with at least twice the initial margin. For instance, the British pound big contract has a $2025 margin, so your account should have at least $4050 and you should only trade 1 contract with that amount. There are micro contracts for some currency futures. These are 1/10th the size of the regular contracts with 1/10 the margin requirements, but the traded volume is small and the movements somewhat erratic. I guess a $1000 account could trade these.

That small of an account, you would need no cost charting. Check out ThinkorSwim, but I think its minimum account opening balance is $3500. Another choice to look at is MBTrading. I have not used a strictly FOREX account, so no recommendations there.

Hope this helps. Please ask any other questions you may have.

My focus is on:
1. Avoid the opening chop.
2. Honor stops
3. Ensure reward > risk on all trades

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