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A Cowboy's Trading Journal
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A Cowboy's Trading Journal

  #251 (permalink)
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Day structure

http://traderfeed.blogspot.com/2009/12/trading-process-day-structure.html?m=1

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  #252 (permalink)
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Relative volume and volatility

http://traderfeed.blogspot.com/2009/01/relative-volume-and-volatility.html?m=1

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  #253 (permalink)
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Dallas, TX, USA
 
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I have been thinking about so many things related to trading, for example context, intermarket relationship, FOMC, rate hikes etc etc. what I forgot is I don't have experience (I am gaining that knowledge but still long way to go) in recognizing all those factors well ahead to take advantage and it is definitely above my pay grade. I am also not so good in adapting quickly (working on that).

But, what I forgot is PRICE will CAPTURE and REFLECT all these relationships isn't it? If I can just follow PRICE using a very simple method that would be enough. Anyway I don't want to do day trading because of my impulsiveness.

So what I need?

1. Very simple TREND FOLLOWING method (may be as simple as a moving average etc...)

2. Big enough time frame to eliminate whipsaws (I am leaning towards 2hr time frame)

3. STOP based on VOLATILITY (Leaning towards ATR)

4. This is very important (CONTROLLING MIND - NOT SECOND GUESSING CONSTANTLY)

Any ideas out there?

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  #254 (permalink)
Elite Member
Dallas, TX, USA
 
Futures Experience: Advanced
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bmtrading9 View Post
I have been thinking about so many things related to trading, for example context, intermarket relationship, FOMC, rate hikes etc etc. what I forgot is I don't have experience (I am gaining that knowledge but still long way to go) in recognizing all those factors well ahead to take advantage and it is definitely above my pay grade. I am also not so good in adapting quickly (working on that).

But, what I forgot is PRICE will CAPTURE and REFLECT all these relationships isn't it? If I can just follow PRICE using a very simple method that would be enough. Anyway I don't want to do day trading because of my impulsiveness.

So what I need?

1. Very simple TREND FOLLOWING method (may be as simple as a moving average etc...)

2. Big enough time frame to eliminate whipsaws (I am leaning towards 2hr time frame)

3. STOP based on VOLATILITY (Leaning towards ATR)

4. This is very important (CONTROLLING MIND - NOT SECOND GUESSING CONSTANTLY)

Any ideas out there?


I know I have trust a system if it's showed good results in backtesting but I didn't...My system said short at 2091 but it was chopping before hence missed the entry....working on my fourth point.

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  #255 (permalink)
Elite Member
Dallas, TX, USA
 
Futures Experience: Advanced
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Favorite Futures: ES, YM, TF, CL, GC and ETF's
 
Posts: 1,679 since Mar 2013
Thanks: 2,733 given, 1,873 received

As I mentioned before I always look for mean reversion trades that and loss aversion always bite me in the ass...So why do I need to find highs and bottoms to place trades? If my points are accurate enough I will get entry but what If I wait for confirmation and enter the trade in the direction of trend and manage it with STOPS that would have helped me in the long term...but in choppy environment I will get chopped up let it be as long as I am profitable overall that shouldn't be an issue...and more over chop means ending of the trend....so today the system I am testing with gave me a sell signal at 2092 but missed it because that signal came in the night around 2 AM. and price bounced of last week's low....

I am sure many will not like the idea of moving average but last 3 months/3 years back testing is giving me good results but can I trust TOS results?, I don't know so I am going try ninjatrader for back testing...let me see, I prefer to automate this but I need good results before doing it.

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  #256 (permalink)
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bmtrading9 View Post
I know I have trust a system if it's showed good results in backtesting

You shouldn't. The way most people backtest it's just curve fitting and has low probability of correlation to future events.

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  #257 (permalink)
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Big Mike View Post
You shouldn't. The way most people backtest it's just curve fitting and has low probability of correlation to future events.

Mike

I agree, what I want to rely on is PRICE because all these correlations will translate into price. As I recognize I don't have expertise (I am trying to gain, thanks once again to you and all the traders here) to clearly identify these nuances ahead of time. Also, I am not a full-time trader to be trading Intra-day and I recognize that I am not fast enough to adapt to quick changes but I want to be successful, that desire is fueling me enough to learn proper risk management, position management etc...I am fine with the lag as long as I am in the proper trend direction. Thanks for all the help.

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  #258 (permalink)
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bmtrading9 View Post
As I mentioned before I always look for mean reversion trades that and loss aversion always bite me in the ass...So why do I need to find highs and bottoms to place trades? If my points are accurate enough I will get entry but what If I wait for confirmation and enter the trade in the direction of trend and manage it with STOPS that would have helped me in the long term...but in choppy environment I will get chopped up let it be as long as I am profitable overall that shouldn't be an issue...and more over chop means ending of the trend....so today the system I am testing with gave me a sell signal at 2092 but missed it because that signal came in the night around 2 AM. and price bounced of last week's low....

I am sure many will not like the idea of moving average but last 3 months/3 years back testing is giving me good results but can I trust TOS results?, I don't know so I am going try ninjatrader for back testing...let me see, I prefer to automate this but I need good results before doing it.

There is nothing wrong with looking for mean reversion trades at highs or bottoms - they allow for good RR. If you back tested your timeframe and your statistical analysis tells you the probability of price reaching past a certain point is lower (SD1, SD2...etc), trading contrarian at that point will give you an edge - this is your trade location edge. This is why a lot of people use VP, it shows you those areas.

Your execution edge is reading order flow/price to find the turn at that point, not blindly fading into momentum. This is where CD/TS/DOM comes in. Waiting for confirmation is too slow, ES is too choppy and there are not enough trends. You have to be in at the turn, not after the confirmation - your RR becomes exponentially worse if you wait for too much confirmation.

If you only read price you will get chopped up because you don't have a statistical edge in your trade location - this is why almost all indicators "don't work", when infact, they do work - if proper context is observed and applied.

Also your chop issue is because your stops are too tight, if you are a fading tops/bottoms, you have to be very generous with your stops, especially on the ES.

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  #259 (permalink)
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PeakGrowth View Post
There is nothing wrong with looking for mean reversion trades at highs or bottoms - they allow for good RR. If you back tested your timeframe and your statistical analysis tells you the probability of price reaching past a certain point is lower (SD1, SD2...etc), trading contrarian at that point will give you an edge - this is your trade location edge. This is why a lot of people use VP, it shows you those areas.

Your execution edge is reading order flow/price to find the turn at that point, not blindly fading into momentum. This is where CD/TS/DOM comes in. Waiting for confirmation is too slow, ES is too choppy and there are not enough trends. You have to be in at the turn, not after the confirmation - your RR becomes exponentially worse if you wait for too much confirmation.

If you only read price you will get chopped up because you don't have a statistical edge in your trade location - this is why almost all indicators "don't work", when infact, they do work - if proper context is observed and applied.

Also your chop issue is because your stops are too tight, if you are a fading tops/bottoms, you have to be very generous with your stops, especially on the ES.

Excellent mate, I agree ES is too slow for mean reversion trading, maybe CL but I don't have guts to touch it...I got burnt once with oil, still I look for some swing trades in oil and gold though if chart looks decent enough dip buy.

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  #260 (permalink)
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bmtrading9 View Post
Excellent mate, I agree ES is too slow for mean reversion trading, maybe CL but I don't have guts to touch it...I got burnt once with oil, still I look for some swing trades in oil and gold though if chart looks decent enough dip buy.

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Might have missed the point - MR is good for ES because of how badly it trends, slow is only relative - you can normalise the pace of the market by using a tick chart instead of a time chart. I trade ETH, which means a MR trade can play out over 3 or 4 hours if I open one during the Asian session, however, speed is not an issue as the same scenario can play out regardless if it took 15mins or 3hours - the chart looks the same as the tick chart normalises the pace.

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