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How I Trade For a Living
Started:August 30th, 2016 (10:48 AM) by rocksolid68 Views / Replies:49,346 / 662
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How I Trade For a Living

Old October 5th, 2016, 08:32 PM   #231 (permalink)
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sixtyseven View Post
Surely you are only trading when 'perceive' you have identified a location where there is that 4% anomaly, and price has a 48:52 chance of moving in your direction over your timeframe?

Or are you suggesting you can make tons of money by coin flip trading? - which is the same to me as saying 50% chance of upticking or downticking

Or is it more in the realms of - "i've identified where I think I'm wrong and price is not quite there yet. The PA doesn't look too shitty and obviously against me, lets average down, and hope that perceived anomoly that got me into this trade holds up"

If you're sure the 50:50 proposition is correct - would you mind drawing up a decision tree, with those probabilities, and talk us through how to trade that successfully.

Haha. You are on to a WHOLE other topic now. "Trade Theory" I like to call it.

Without spending an hour on it, here is my brief answer:

All methodologies/systems can work if they have the correct trade management and money management. The trader also needs confidence in the method/system they use.

People that use moving averages, stochastics, VWAP, Pivots, etc. can all be successful with the three things above. We all know someone that can successfully trade one of these things. It isn't the method or system that matters, but the trader himself (or herself)

     
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Old October 5th, 2016, 08:45 PM   #232 (permalink)
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I would just like to say the following:

-Everything I say is a matter of opinion (my own )
-I am not trying to tell anyone what to do or what not to do
-I am trying to provide value to you all
-If you disagree with anything I say, you are free to say so, but do it in a friendly manner like everyone has done here
-Lastly, get what you want out of this! Ask questions! Poke holes in my thoughts if it helps you! Do whatever! Just learn and progress as a person and as a trader.

Thanks for reading!

     
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Old October 5th, 2016, 10:35 PM   #233 (permalink)
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Let's try again



rocksolid68 View Post
Haha. You are on to a WHOLE other topic now.

Sooooo ummmm, you deflected that nicely . I thought the questions were worthy of a reply in the interests of debate. I believe it's harmful to aspiring traders who have seen your profitable run to hear it's simply a case of averaging down because you have a 50% chance of turning it into a winner. I believe there is a little more to it.

The way you have written it, it comes across that you can be successful by having confidence, by trading in any direction as long as you have a thesis, just average down, scale out and get those asymmetric winners using correct trade and money management.

There is a subtle difference between being successful with a 50% win rate, and a 50% chance of the next bar upticking or downticking.

     
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Old October 5th, 2016, 10:35 PM   #234 (permalink)
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I think that the basic idea of scaling in more right at the edge of where you can't hold the position any more has a lot of potential. If price moves in your favor, you've added at the best possible level (let's say you're long, then you've added at almost the lowest point where you could still maintain the trade.) If price moves against you, you will have a loss, but (a) the loss on your original position is not any greater than it would have been, and (b) the loss on the additional part of the position is fairly low, because you are only going to lose a few ticks on it.

But if it turns around in your direction, you have added at a very good point. If it moves a good distance, that will matter a lot. Your gain on the added position will be much higher than the small loss you would have risked on it.

So, if the trade basically is a good one, this can make the payout better. Of course, you will have to have basically a good trade. But that is true anyway.

This has nothing to do with anything relating to probability of up or down moves or ticks; it's just a matter of where you have established the parts of your position. But when you have established some of it right at the extreme viable edge, you will have improved your basis, and so will have improved the size of your results, if they are in your favor.

It will take a certain tolerance for risk. It also is not in tune with how some traders, and trading authors, suggest you should go. But I suggest that this is a matter of personal preference. Everyone should only do what they can be comfortable with, and successful with too.

I think this can be a viable technique, if you are up for it. And, different strokes for different folks, always....

I think this is a good idea, Alex. Might not be for the faint-hearted, but it makes sense.

Bob.

     
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Old October 5th, 2016, 10:44 PM   #235 (permalink)
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sixtyseven View Post

There is a subtle difference between being successful with a 50% win rate, and a 50% chance of the next bar upticking or downticking.

This is true. Let's kill this idea of assigning a 50% -- or ANY % -- chance to the next bar doing anything. It is difficult to assign probabilities to anything. It can't just be done by saying "it can go either way...." That doesn't mean the odds are even, it means they are not known, a different thing.

Also, I don't think this probability stuff has any bearing on the argument. I just put up a post to that effect, and I generally agree with the scaling-in tactic, probability considerations aside.

I'm going to bow out on probability. Some arguments never get resolved.

But the tactic has a certain merit, albeit not for everyone.

Bob.

     
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Old October 5th, 2016, 10:59 PM   #236 (permalink)
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Hickock View Post
@rocksolid68
First of all, I hope you don’t mind me jumping in to your journal uninvited with this little illustration of your idea.
Today on the TF was a perfect illustration of your idea of adding in to a trade, even when taking heat, if your original idea hasn’t been invalidated.


Background: It was a gap-n-go on most of the indexes today. Very frustrating if you didn’t buy at around 12 pm PST yesterday. The only thing to do at the open is hold your nose and jump in long with a big stop, or wait till around till noon for the move to be exhausted.


This was a sim trade

This trade is a very aggressive trade and I would only enter half size.

Chart: Initial Entry
After you are relatively certain the top is in, you wait for the LH and enter. The blue line is the stop, and is a 1 pt. or $100 per contract risk. At this point one of three things will happen.




1. You take a full stop

2. It will drop away from your entry fast

3. It will drop down a little then pop up for a lower high before it dumps (what ended up happening)

I short it at 1251.4 with two contracts and max risk of $200.


I take a little heat and then it moves down. I end up bailing on the trade with 6 ticks of profit x 2 =$120.



I saw that it didn’t violate the first entry, or the initial stop. I re-enter at 1251.4 again with two contracts and move my stop to 1252.0. It falls away and I take the first contract off at 1245.3 and the second at target of 1244.6.


Totals:
1st $610.00
2nd $680.00
Total $1290.00


Not bad, but there is an even better way.

I should have held the first two and added two more contracts at the initial entry or a little higher and moved my stop to 1252. Why 1252? Because if it got above there, chances are the trade is no longer valid.


Total risk = $240.00. Slightly bigger than the initial stop of $200.00, but much less than entering at the start with 4 x $100 = $400 risk to start.


Using the same targets, I would have banked $2580. Yes, I took some heat, but I doubled my return for $40 additional risk.


While technically this isn’t adding to a loser, it is aggressively levering up when your idea is still valid and at the same reducing your overall risk by $160.00. Much better than entering full risk on an unproven (at the beginning) idea. Since the initial trade only took 10 ticks of heat, I shouldn’t have been so quick to bail out. I did realize my mistake and re-entered for a very nice trade, even if it was just SIM.


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I hope yo don't mind me posting this in your journal. But I thought it was a relly good illustration of your point about adding in.

How were you able to pinpoint TF being the weakest index and the one that was going to make the move that it did?
Because NQ didn't make a LH until 12pm PST and the ES and YM didn't even make a LH before selling off in the close.
Also is it from your experience, that TF is usually a leading index compared to the rest of the majors?

Side note: Was testing out Tradovate software, shorted Nikkei and bought bonds near lows. Made a nice 5k profit on 50k sim account today. But if this was my real account, I would nowhere near be comfortable accepting the risk because the dollar loss relative to the size of the account is very large.


Last edited by emptymind; October 5th, 2016 at 11:15 PM.
     
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Old October 5th, 2016, 11:16 PM   #237 (permalink)
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sixtyseven View Post
Sooooo ummmm, you deflected that nicely . I thought the questions were worthy of a reply in the interests of debate. I believe it's harmful to aspiring traders who have seen your profitable run to hear it's simply a case of averaging down because you have a 50% chance of turning it into a winner. I believe there is a little more to it.

The way you have written it, it comes across that you can be successful by having confidence, by trading in any direction as long as you have a thesis, just average down, scale out and get those asymmetric winners using correct trade and money management.

There is a subtle difference between being successful with a 50% win rate, and a 50% chance of the next bar upticking or downticking.

Deflected it... hmmm... That is not how I would describe what I did, but okay.

You are virtually asking me how to trade profitably. That is no simple answer and when I give you a brief and vague answer, you call it deflection.

I never once said that you have to average down. I just said that I do that and it works nicely for me. I also showed some reasoning (fact or opinion, your pick) and my rationale for why I believe it benefits me.

I do not always average down. I average down when price goes against me and I average up when price moves in my favor. That simple. I do not only do one or the other.

I do think that you can trade any direction and be profitable as long as you have confidence, good money management, and good trade management! I will give you an example that has occurred in live action for weeks on end!

@Inletcap and I traded opposite directions on the ES and both were profitable! This happened quite often! Look through the Spoo thread and you will see this happen consistently with many different traders.

Averaging down is not the holy grail. Having a 50% win rate isn't either. Also, as far as the ticking goes, I also said that it has a 50% chance to go up or down, not 50% chance to go X amount of points. This is a very simple equation:

Assuming 50% chance of uptick, we would have a ~1.4% chance of going 10 ticks with out a single downtick. So no, it is not a 50% chance to reach your target, but what I am saying is that if it works out, you should make far more than if it didn't. (asymmetrical returns/good trade management)

I am not trying to harm aspiring traders. If this is the case, I will stop posting here. Let me know if this is the case!

     
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Old October 5th, 2016, 11:25 PM   #238 (permalink)
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rocksolid68 View Post
I am not trying to harm aspiring traders. If this is the case, I will stop posting here. Let me know if this is the case!

It's not. This is what happens when you step into the arena. Stick with it. You're helping people. There will be disagreements, but this is natural.

Bob.

     
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Old October 5th, 2016, 11:31 PM   #239 (permalink)
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bobwest View Post
It's not. This is what happens when you step into the arena. Stick with it. You're helping people. There will be disagreements, but this is natural.

Bob.

I knew there would come times where people disagree or dislike me. That I was ready for.

The LAST thing I want to do is hurt anybodies trading.

Thank you, Bob. I appreciate the reassurance.

     
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Old October 5th, 2016, 11:43 PM   #240 (permalink)
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Sidenote:

Adding one contract to ZB short right now. Let's see if this can drop some more!

     
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